HELP - Lubik and Schorfheide (2007)

Dear all,

I am trying to estimate a version of the small open economy by Lubik and Schorfheide (2007). I am very very beginner.
I wonder how the observable variables must be declared. Specifically, the productivity shock used in the model (zt) must be added to the observable variables?
Why this makes the stationary model?
Some measurement error should be added? If so, how?
Could anyone help me?
Thanks a lot


Please read
Pfeifer (2013): “A Guide to Specifying Observation Equations for the Estimation of DSGE Models” at