var 

 %Domestic block

    c           ${c}$           (long_name='consumption')
    y           ${y}$           (long_name='output')
    i           ${i}$           (long_name='nominal interest rate')
    q           ${\q}$         (long_name='real exchange rate')
    s           ${s}$           (long_name='terms of trade')
    pi          ${\pi}$         (long_name='CPI inflation') 
    pi_h        ${\pi_H}$       (long_name='domestic inflation')  
    pi_f        ${\pi_F}$       (long_name='Import inflation')
    psi_f        ${\psi_F}$     (long_name='LOP gap')
    a           ${a}$           (long_name='real net foreign asset position as a fraction of steady state output')
    

%Foreign block

    pi_star          ${\pi_star}$        (long_name='VAR(2) foreign inflation')
    y_star          ${\y_star}$         (long_name='VAR(2) foreign output')
    i_star          ${\i_star}$         (long_name='VAR(2) foreign interest rate')

%Exogenous disturbances

       eps_a        ${\varepsilon^a}$       (long_name='technology disturbance')
       eps_g        ${\varepsilon^z}$       (long_name='preference disturbance')
       eps_s    ${\varepsilon^y}$       (long_name='world output growth disturbance')
       eps_cp    ${\varepsilon^cp}$       (long_name='ccost push disturbance')
       
 
    ;

varexo 
       xi_pi_star   ${\varxi^y}$       (long_name='world inflation shock')
       xi_y_star   ${\varxi^y}$       (long_name='world output growth shock')
       xi_i_star   ${\varxi^y}$       (long_name='world interest rate shock')

       xi_a        ${\varxi^a}$       (long_name='technology shock')
       xi_M       ${\varxi^M}$       (long_name='monetary policy shock')
       xi_g        ${\varxi^g}$       (long_name='preference shock')
       xi_s        ${\varxi^g}$       (long_name='interest rate premium shock')
       xi_cp        ${\varxi^g}$       (long_name='cost push shock')
       
       ;

parameters 

    alpha          ${\alpha}$      (long_name='openness parameter')
    beta            ${\beta}$       (long_name='discount factor')
    chi             ${\beta}$       (long_name='interest rate premium elasticity')
    sigma          ${\sigma}$      (long_name='inverse EIS')
    phi             ${\varphi}$     (long_name='inverse Frisch elasticity')
    eta             ${\eta}$        (long_name='substitutability foreign/domestic goods') 
    h               ${h}$           (long_name='habit')
    theta_h         ${\theta_h}$    (long_name='Home Calvo parameter')
    theta_f         ${\theta_f}$    (long_name='Importer Calvo parameter')
    delta_h         ${\delta_h}$    (long_name='Home indexation')
    delta_f         ${\delta_f}$    (long_name='Importer indexation')
    psi_i           ${\psi_i}$    (long_name='Taylor rule')
    psi_pi          ${\psi_pi}$    (long_name='Taylor rule')
    psi_y           ${\psi_y}$    (long_name='Taylor rule')
    psi_d_e         ${\psi_d_e}$    (long_name='Taylor rule')
    psi_d_y         ${\psi_d_y}$    (long_name='Taylor rule')
    
    

    rho_y_star11      ${\rho_{y^*}11}$  (long_name='VAR(2) coefficient')
    rho_y_star12      ${\rho_{y^*}12}$  (long_name='VAR(2) coefficient')
    rho_y_star21      ${\rho_{y^*}21}$  (long_name='VAR(2) coefficient')
    rho_y_star22      ${\rho_{y^*}22}$  (long_name='VAR(2) coefficient')
    rho_y_star31      ${\rho_{y^*}31}$  (long_name='VAR(2) coefficient')
    rho_y_star32      ${\rho_{y^*}32}$  (long_name='VAR(2) coefficient')

    rho_pi_star11      ${\rho_{pi^*}11}$  (long_name='VAR(2) coefficient')
    rho_pi_star12      ${\rho_{pi^*}12}$  (long_name='VAR(2) coefficient')
    rho_pi_star21      ${\rho_{pi^*}21}$  (long_name='VAR(2) coefficient')
    rho_pi_star22      ${\rho_{pi^*}22}$  (long_name='VAR(2) coefficient')
    rho_pi_star31      ${\rho_{pi^*}31}$  (long_name='VAR(2) coefficient')
    rho_pi_star32      ${\rho_{pi^*}32}$  (long_name='VAR(2) coefficient')

    rho_i_star11      ${\rho_{i^*}11}$  (long_name='VAR(2) coefficient')
    rho_i_star12      ${\rho_{i^*}12}$  (long_name='VAR(2) coefficient')
    rho_i_star21      ${\rho_{i^*}21}$  (long_name='VAR(2) coefficient')
    rho_i_star22      ${\rho_{i^*}22}$  (long_name='VAR(2) coefficient')
    rho_i_star31      ${\rho_{i^*}31}$  (long_name='VAR(2) coefficient')
    rho_i_star32      ${\rho_{i^*}32}$  (long_name='VAR(2) coefficient')
    


    

    rho_a           ${\rho_a}$      (long_name='autocorrelation technology shock')
    rho_g           ${\rho_{g}}$    (long_name='autocorrelation preference shock')
    rho_s           ${\rho_{s}}$    (long_name='autocorrelation  IP')
    rho_cp           ${\rho_{cp}}$    (long_name='autocorrelation CP shock')

   

    ;

%----------------------------------------------------------------
% Parametrization
%----------------------------------------------------------------
    alpha =0.3;         
    beta=0.992;          
    chi = 0.01; 
           
    % sigma=2 ;       
    % phi= 4;           
    % eta =2;           
    %h =0.4;             
     % theta_h = 0.75;     
    % theta_f  =0.7;       
    % delta_h  =0.5;        
    % delta_f   = 0.5;      
    % psi_i  = 0.8;        
    % psi_pi  =1.5;      
     %psi_y  = 0.5;         
    % psi_d_e  = 0.6;       
     %psi_d_y  = 0.5; 
     
  
              
    %rho_g = 0.8;            
   % rho_s = 0.8;           
   % rho_cp = 0.8; 

    rho_y_star11 = -28.50568;      
    rho_y_star12  = -9.117796;    
    rho_y_star21     = 0.381200; 
    rho_y_star22      = 0.046573;
    rho_y_star31      = -2.337133;
    rho_y_star32      = -1.972114;

    rho_pi_star11   = 0.290143;   
    rho_pi_star12     = -0.027037;
    rho_pi_star21     = 0.000129;
    rho_pi_star22      = 0.000728;
    rho_pi_star31      = -0.046015;
    rho_pi_star32      = 0.022634;

    rho_i_star11      = 0.236419;
    rho_i_star12      =  0.078858;
    rho_i_star21     = 0.012113;
    rho_i_star22      = -0.010194;
    rho_i_star31      = 1.654274;
    rho_i_star32      = -0.671450 ;

 			


%----------------------------------------------------------------
% First Order Conditions
%----------------------------------------------------------------
model(linear); 
      
[name='Euler equation']
c-h*c(-1)=c(+1)-h*c-sigma^(-1)*(1-h)*(i-pi(+1))+sigma^(-1)*(1-h)*(eps_g-eps_g(+1));

[name='Goods market clearing']
(1-alpha)*c=y-alpha*eta*(2-alpha)*s-alpha*eta*psi_f-alpha*y_star  ;

[name='Terms of trade']
s-s(-1)=pi_f-pi_h;



[name='Real exhchange rate']
 q=psi_f+(1-alpha)*s ;


[name='Optimal price setting condition 1']
 pi_f-delta_f*pi_f(-1)=theta_f^(-1)*(1-theta_f)*(1-theta_f*beta)*psi_f+beta*(pi_f(+1)-delta_f*pi_f) +eps_cp;


[name='Optimal price setting condition 2']
 pi_h-delta_h*pi_h(-1)=theta_h^(-1)*(1-theta_h)*(1-theta_h*beta)*(phi*y-(1+phi)*eps_a+alpha*s+sigma*(1-h)^(-1)*(c-h*c(-1)))+beta*(pi_h(+1)-delta_h*pi_h) ;
%mc= (phi*y-(1+phi)*eps_a+alpha*s+sigma*(1-h)^(-1)*(c-h*c(-1)));


[name='CPI inflation']
pi= pi_h+alpha*(s-s(-1));


[name='Uncovered interest rate parity']
i-pi(+1)- (i_star-pi_star(+1))=(q(+1)-q)-chi*a-eps_s;

[name='Budget constraint']
c+a=beta^(-1)*a(-1)-alpha*(s+psi_f)+y;

%DISTURBANCES

[name='World inflation disturbance']
   pi_star =  1.269869+rho_pi_star11*pi_star(-1) +rho_y_star11*y_star(-1)+ rho_i_star11*i_star(-1)+rho_pi_star12*pi_star(-2) +rho_y_star12*y_star(-2)+ rho_i_star12*i_star(-2)+xi_pi_star;

[name='World output disturbance']
   y_star = -0.004182+rho_pi_star21*pi_star(-1) +rho_y_star21*y_star(-1)+ rho_i_star21*i_star(-1)+rho_pi_star22*pi_star(-2) +rho_y_star22*y_star(-2)+ rho_i_star22*i_star(-2) + xi_y_star;

[name='World interest rate disturbance']
   i_star =0.066390+rho_pi_star31*pi_star(-1) +rho_y_star31*y_star(-1)+ rho_i_star31*i_star(-1)+rho_pi_star32*pi_star(-2) +rho_y_star32*y_star(-2)+ rho_i_star32*i_star(-2) + xi_i_star;


[name='Technology disturbance']
    eps_a = rho_a*eps_a(-1) + xi_a;


[name='Preference disturbance']
    eps_g = rho_g*eps_g(-1) + xi_g;

[name='Interest rate premium disturbance']
    eps_s = rho_s*eps_s(-1) + xi_s;

[name='Cost push disturbance']
    eps_cp = rho_cp*eps_cp(-1) + xi_cp;



    ['Monetary Policy']
    i  = psi_i*i(-1)+psi_pi*pi + psi_d_y*(y-y(-1))+psi_y*y+psi_d_e*(q-q(-1)+pi-pi_star) + xi_M;



estimated_params;


    sigma   , gamma_pdf, 1.2,  0.4 ; 
    phi     , gamma_pdf, 1.5, 0.75 ;     
    eta     , gamma_pdf, 1.5, 0.75 ;  
    h       , beta_pdf , 0.5, 0.25 ;    
    theta_h , beta_pdf , 0.5, 0.1  ;   
    theta_f , beta_pdf , 0.5, 0.1  ;       
    delta_h , beta_pdf , 0.5, 0.25 ;    
    delta_f , beta_pdf , 0.5, 0.25 ;      
    psi_i   , beta_pdf , 0.5, 0.25 ;      
    psi_pi  , gamma_pdf, 1.5, 0.3  ;    
    psi_y   , gamma_pdf, 0.25, 0.13;       
    psi_d_e , gamma_pdf, 0.25, 0.13;        
    psi_d_y , gamma_pdf, 0.25, 0.163; 

  
   rho_a , beta_pdf, 0.8, 0.1;
   rho_g , beta_pdf, 0.8, 0.1;
   rho_s , beta_pdf, 0.8, 0.1;
   rho_cp, beta_pdf, 0.5, 0.25;


       stderr xi_pi_star, inv_gamma_pdf, 0.5, inf ;
       stderr xi_y_star , inv_gamma_pdf, 0.5, inf ;
       stderr xi_i_star , inv_gamma_pdf, 0.5, inf ;
       stderr xi_a      , inv_gamma_pdf, 0.5, inf ;
       stderr xi_M      , inv_gamma_pdf, 0.5, inf ;
       stderr xi_g      , inv_gamma_pdf, 0.5, inf ;
       stderr xi_s      , inv_gamma_pdf, 0.5, inf ;
       stderr xi_cp     , inv_gamma_pdf, 0.5, inf ;
       

   

end;

varobs y i pi q s pi_star y_star i_star;

% estimation

estimation(datafile=Tdat,mode_check,mode_compute=6,mh_replic=10000,mh_nblocks=2,bayesian_irf,lik_init=2,nograph)  c y i q s pi pi_h pi_f psi_f a;
         

oo_regla1_log = oo_; 
save('oo_regla1_log.mat', 'oo_regla1_log');
load oo_regla1_log.mat;