Strange condition in Lubik and Schorfheide (2007)

Dynare help (legacy posts)
1

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

2

The home country’s CPI is defined as
P_t=(1-alpha)P_ht+alphaP_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