Hi everyone!

I am fell confuse about my taylor rule formular.

I bulid three types of taylor rule, the first one is orginal version, the second one add the variable of exchange rate, and the third one add the variable of foreign interest rate.

The code are as follows:

```
r_h = rho * r_h(-1) + (1-rho) * phi_r * pi_h + e_r_h; %1 orginal
r_h = rho * r_h(-1) + (1-rho) * (phi_r * pi_h + phi_rer * de) + e_r_h; %2 exchange rate
r_h = rho * r_h(-1) + (1-rho) * (phi_r * pi_h + phi_rf * drf) + e_r_h; %3 foreign interest rate
drf = r_f - r_f(-1); %3 foreign interest rate
```

‘phi’ is a parameter, de=e/e(-1), and e is nominal exchange rate. r_f is foreign interest rate.

But I found that there is no difference between the IRF functions under the three types of taylor rules.

Could any one offer me some advice of what’s wrong with my model?

Thank you very much!

Code and the key paper:

Here is my code:

nk2c0105.mod (8.3 KB)

And the code illustrated above is from line 165 to 170.

I add a shock to the foreign interest rate in my two country model.

Here is the orginal paper of my code:

chapter_6(orginal).pdf (481.5 KB)