yt=mt - pt- ψ(yt-y*)
mt= m(bar) + εt
yt= γ(pt- E(t-1) pt )
Where εt ~ N(0,σ_ε^2)
Where y, p and m are logs of real output, prices and the money supply respectively and εt is monetary shock.
I know how to solve a similarr model without the - ψ(yt-y*) but the addition of - ψ(yt-y*) confuse me.
I hope that I can be pointed in the correct direction so I can attempt to solve it on my own.