Why am I getting this error?

Installation and Setup
1

var y;
varexo e;
paramaters alpha sigma
alpha=0.75;
sigma=1

//Model
model;
y=1+alpha*y(-1)+e;
end;
Unrecognized function or variable ‘varexo’.

2

Are you erroneously trying to execute a Dynare mod-file as Matlab file?