
Hi folks, I was wondering if there is a way to implement a model of the following form:
Transition Variables
x1
Measurement Variables
y1, y2
Parameters:
A, B
Transition block:
x1t = A * x1t1 + B y2t + et;
Measurement block:
y1t = C * x1t + vt;
y2t = y2t;
IRIS throws an error because y2 is not a transition variable.
I tried (!exogenous_variables) without success as these variables only work on the !dtrends block. What is the most appropriate way to set up this model?
Thanks!
Hector


Apr 2, 2014 at 8:46 AM
Edited Apr 2, 2014 at 9:17 AM

Since y2 is entering your state equation so you need to specify a process for it. Needs to look something like this.
!transition_variables
x1,y2s
!measurement_variables
y1,y2
!parameters
a,b
!transition_equations
x1 = a * x1{1} + b * y2s + e ;
y2s = y2s_shk ;
!measurement_equations
y1 = c * x1 + v ;
y2 = y2s ;
!transition_shocks
et,y2s_shk,

