I am trying to replicate the baseline model of this paper:
it should be pretty easy to replicate, but I keep getting a collinearity issue.
I know that often prices are not determined in these models, but a version of this code with inflation instead of the price level does not solve the problem.
I’m wondering if there is something obvious that I do not immediatly see.
I would greatly appreciate if anoyone could give me his opinion on this. Thanks in advance,
fxforecast_steadystate.m (1.4 KB)
param_FX.m (794 Bytes)
ss_FX_new.m (4.4 KB)
fxforecast.mod (6.5 KB)