Hi, there is a strange problem in my model.

Variable named “FX” is not stationary in my model but its growth rate is ok.

That is, if I code my mod-file as

model ;

…

…

ac - ac(-1) = fx - fx(-1) + de - pi ;

end;

dynare cannot run estimation showing Blanchard and Kahn message.

However, If I code

model

…

…

ac - ac(-1) = dfx + de - pi ;

end ;

It is OK and dynare run estimation well.

I would like to know if I continue my work with this.

Next question is how to use data on “dfx”.

Since “dfx” means FX growth, I use its growth rate data to estimate the model.

However, data for other observable variables are all HP-filtered ones

because I do not impose unit-root technology.

According to the data on FX reserve there is a trend in its level.

I first thought that since fx (satisfying dfx = fx - fx(-1)) is not defined in my model because of its nonstationarity,

it is ok to use just its growth rate data without detrending.

Instead, I use prefilter=1 to remove a trend in the FX growth rate.

How do you think so?

Do I have to use the growth rate of HP-filtered FX ?

I uploaded my mod-file and data. The data file is actually excel spreadsheet please use “.xlsx”.

Thank you

pr_k.mod (8.8 KB)

data_k.zip (48.2 KB)