I am trying to replicate “Monetary Policy in a Low Pass-through Environment” by Monacelli. Largely similar to Gali Monacelli 2005 but with imperfect exchange rate pass-through.

jstor.org/stable/3839027?seq … b_contents

or

ecb.europa.eu/pub/pdf/scpwp … 74e0f7ab1a

I am having trouble identifying the equilibrium conditions as I don’t want to use the combined aggregate demand or supply equations. Instead i would like to be able to make changes (for example) to the euler equation later or view separately exports, imports and consumption of home goods. I am trying to introduce a Taylor rule and a monetary policy shock, but I get the following error:

[quote]model_diagnostic: the Jacobian of the static model is singular

there is 1 colinear relationships between the variables and the equations

Colinear variables:

e

w

p

ph

pf

Colinear equations

2 3 10 17 19 21 25

The presence of a singularity problem typically indicates that there is one

redundant equation entered in the model block, while another non-redundant equation

is missing. The problem often derives from Walras Law.

Error using print_info (line 54)

One of the eigenvalues is close to 0/0 (the absolute value of numerator and denominator is

smaller than 1e-06![/quote]

I have no idea on how to deal with it. I would appreciate any help. I would be very grateful if someone could take a look at my code.

Thanks.

helpmona05.mod (2.67 KB)