Correct way to define monetary policy rule

General DSGE Modeling
1

Hello,

I am writing a NK model as in Iacoviello 2005. Could you please let me know if the MP rule I write below is correct and should work? Thanks

i = i(-1)+(1+i(-1))(rho_i(i(-1)-r_ss)/(1+r_ss)
+(1-rho_i)(rho_pi((pi(-1)-pi_ss)/pi_ss)
+rho_y*((y(-1)-y_ss)/y_ss))
+(aggregateMP-aggregateMP(-1)));

aggregateMP = ssigmaMP * aggregateMPShock;

where

rho_i = .73;
rho_pi = 1.27;
rho_y = .13;
r_ss = 0.0212;
pi_ss = 1.008;
y_ss = 1;
ssigmaMP = 0.29;
varexo aggregateMPShock;

2

There is no obvious right or wrong here. It all depends on the rule you want to implement. That being said, if your rule is supposed to be linearized, it looks strange, particularly the interest rate smoothing part.