Hi, I have been trying to reproduce Lubik and Schorfheide’s 2007 paper.

The home country’s CPI is defined as

P_t=(1-alpha)*P_ht+alpha*P_ft

=(1-alpha)*(P_ht-P_ft)+P_ft

=(1-alpha)*q_t+P_ft (1)

because GM2005 is small open economy model, then we have

P_ft=e_t+Pstar_t (2)

Substituting (2) into (1), and taking the first order differnce of (1)

```
Pi_t=(1-alpha)*Dq_t+De_t+Pistar_t
```

Woule you like to post your mod file? thank you