Sunspot Shock In Gali, Lopez-Salido, Valles (2004)

[vd111]

Hello Professor @jpfeifer ,

I just wanted to understand how do you determine which variable should get the expectations error, as in this post:

Explosive roots=forward-looking variables but still indeterminacy (rank failure)

Are you sure that putting the expectational error on y (which is always determinate) is correct? Shouldn’t it be z=1.5*z(-1)+sunspot-(pi-expectation(-1)(pi));

In the case of Gali et al. (2004), would this be be on output?

Many thanks!