[quote=“jpfeifer”]Please do not use the Macro model base version for estimation. It does not correctly take parameter dependencies into account. This will screw up estimation. A correct version can be found at github.com/JohannesPfeifer/DSGE_mod/tree/master/Gali_Monacelli_2005
Also, there is the issue how you specify your observation equation, see [Dynare Estimation: help)[/quote]
Hi Johannes,
Your mod file for Gali and Monacelli (2005) runs well but model diagnostics show that there is 3 collinear relationships between prices and the exchange rate. Of course, according to the model assumption, they are perfectly correlated. Is the collinearity screwing up estimation? All matrices would be singular in this case.
Thanks,
Aaron