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Dear users

I was trying to estimate the NAIRU from the following model

A dynamic Phillips curve

Dp=c(1)*Dp(-1)+c(2)*Dp(-2)+c(3)*(U-N)+c(4)*D(U-N)+e

where
D= first difference
P= inflation
U=unemployment rate
N=Nairu which it is assumed to follow a random walk
e=error term

2) N=N(-1)+v
v=error term


I wrote the SSpace model in the following way

@signal dinf= c(1)*dinf(-1)+c(2)*dinf(-2)+c(3)*(un_rate-nairu)+c(4)*(un_rate-un_rate(-1)-nairu+nairu2)+[var =exp(c(5))]

@state nairu=nairu(-1)+[var =exp(c(6))]

@state nairu2=nairu(-1)

I got very unsatisfying results. Is this due to a very bad specification of the SSPACE moder, or there are other reasons?

Thanks in advance for your help,

Clemente De Lucia