I’m trying to replicate this paper below (Kam et al), that is a version of Justiniano and Preston (2010) and similar to Monacelli (2005):
I have some questions:
I have an unit root and I suspect it comes from the uip equation, but I couldn’t get rid of that. Any suggestions? (see code)
In Monacelli (2005) and in Gali and Monacelli (2005) the UIP equation can be obtained throught other equations in the model like Euler for local and world economies and International risk sharing condition. Can we obtain the International risk sharing equation from the other equation in Kam et al and Justiniano and Preston? I think it is possible since that equation does not appear in Kam et al and Justiniano and Preston.
I think in the UIP and International Risk Sharing as equilibrium equations of the model. So the fact that they are not present as equilibrium equations simultaneously is a consequence of some type of Walras law or that they are versions of the same thing?
KAM.mod (4.7 KB)