
Let's say I have a transition equation such as
Variable_1 = Intercept + Beta1 * Variable_1{1} + shock1;
When I attempt to change this to
Variable_1 = Intercept + Beta1 * Variable_1{1} + Beta2shock1{1} + shock1;
It doesn't allow me to write the equation this way.
How would you solve this?
Or, if you want to do a simple moving average model (X(t) = mu + residual(t) + betaresidual(t1)), how would you achieve this?
Thanks,



create transition variableshk1= shock1 and use its lagged values


Coordinator
Nov 20, 2014 at 4:32 PM
Edited Nov 20, 2014 at 4:32 PM

Yes, as you discovered you are not permitted to include lags of shocks. :) But it's not really a limitation since you can get around this with auxiliary variables, as ikarib pointed out a little more quickly than I could reply. For example,
!parameters
mu,beta
!transition_variables
x,ev
!transition_equations
x = mu + ev + beta*ev{t1} ;
ev = e ;
!transition_shocks
e

