Dear all,

I am working on a symmetric two-country monetary union model, and I am concerned about the size of the shocks estimated in my model. The variance of my data are about 3 to 5 times bigger for the data of my country compared to the one of the euro area. Should I consider that the variance of my estimated shocks to be multiplied by a value between 3 to 5 too ?

I saw that Kolassa(2008) for example assumed that his prior are 3 times bigger for Poland than for the Euro Area, and is this is a relevant approach? Most of monetary union model assumed just the same prior for shocks from the two countries ?

Thanks