RDP 2010-07: Monetary Policy and the Exchange Rate: Evaluation of VAR Models
Equation (2)
x
t
*
=
E
t
x
t
+
1
*
−
1
σ
(
r
t
*
−
E
t
π
t
+
1
*
)
−
ϕ
1
(
1
−
ρ
a
*
)
a
t
*
+
1
−
ρ
x
*
σ
ν
x
,
t
*
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