Identification problem of Taylor rule coefficients!

Dear all,

The attached file contains codes for identification analysis I did on the simple model of An and Schorfheide (2007, Econometric Reviews: Bayesian Analysis of DSGE Models). The log file (estimate_M1D1.log) is also attached, which shows that all the parameters in the Taylor rules are collinear with respect to other parameters. When I do monte carlo analysis, the same problem arises. Does this problem mean that the Taylor rule coefficients are not identified? Could anyone please provide some deeper insights into the problem? Thanks a lot!!!

Testing prior mean
Evaluating simulated moment uncertainty … please wait
Doing 100 replicas of length 300 periods.
Simulated moment uncertainty … done!

WARNING !!!
The rank of H (model) is deficient!

eps_R is collinear w.r.t. all other params!
psi1 is collinear w.r.t. all other params!
psi2 is collinear w.r.t. all other params!
rho_R is collinear w.r.t. all other params!

WARNING !!!
The rank of J (moments) is deficient!

eps_R is collinear w.r.t. all other params!
psi1 is collinear w.r.t. all other params!
psi2 is collinear w.r.t. all other params!
rho_R is collinear w.r.t. all other params!
Identification Problem.rar (5.71 KB)

Take a look at the appendix to Iskrev (2010): Local identification in DSGE models at www-personal.umich.edu/~niskrev/. It says

See also Section “7.2 The An and Schorfheide (2007) model” of Mutschler (2014): Identification of DSGE Models - the Effect of Higher-Order Approximation and Pruning:

Thank you so much, Dear Johannes! These references are very helpful!