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The representation of the external model in real time is a major source of errors in state estimation. The static model of the external system and the data exchange in real time varies from system to system. In this paper, these issues are studied to determine the data exchange requirements to minimize the errors in the state estimator. It is shown that moderate increases of data exchange from the external model increases state estimator accuracy. The effects of incorporating measurement data from the external system on the state estimator and contingency analysis accuracy are also studied. An algorithm is proposed to determine the optimal selection of external measurements based on the accuracy requirement. Test results on the IEEE 118-bus test system are provided.