Error: The generalized Schur (QZ) decomposition failed

As indicated at

in your model the foreign real interest always appears as

r_s - pi_s(+1)

There is no way to disentangle the two components. You could just define r_s_real instead and formulate

r_s - pi_s(+1)= rho_r_s*(r_s(-1) - pi_s) + v_r_s;                  


r_s_real= rho_r_s*(r_s_real(-1)) + v_r_s;                  

That will solve the collinearity. But because you will replace two variables by one without dropping another, it shows that you are still including one redundant equation. Alternatively, there is a larger problem with your setup.