Dear Dynare Team,

I have read through “A Guide to Specifying Observation Equations for the Estimation of DSGE Models” and other relevant posts in this forum regarding this topic. I just want to confirm that what I am doing is correct. I have the following observable variables in my model: **demeaned log differences of real GDP** (Y_(obs,t)) and **demeaned log values of gross inflation rate** (\Pi_(obs,t)) and **demeaned log values of gross quarterly nominal interest rate** (R_(obs,t)). \Pi_(obs,t) = 1 + \pi_(obs,t)/100 , where \pi_(obs,t) is quarterly inflation rate measured by % change in quarterly CPI. R_(obs,t) = 1 + r_(obs,t)/400, where r_(obs,t) is annual interest rate. I have specified the measurement equation as follows:

where \gamma_i represents the corresponding sample mean of variable i and y_hat, pi_hat and r_hat are the corresponding log-linearised variables appearing in the model. Can someone confirm whether this is correct based on how I have constructed the data.

Regards,

Ernest