var pl_h pl_f p_h p_f y_h y_f c_h c_f cw m_h m_f pie_h pie_f xi_m; //14


varexo epsilon_m;


parameters beta n q rho_m r pie_bar;

beta = 0.989;
n = 0.5;
q = 0.9;
rho_m = 0.45;
r = 0.05;
pie_bar = 1;

//v = 4;        //tried fixing psi according to Walsh 285;

model(linear);


#delta = beta/(pie_bar - beta);
#v = ((1-q)*(1+(2/(r*(2-q)))))/q;
#omega_1 = m_h - m_f;
#l = c_h(+1)-c_f(+1);
#b = ((1-n)/r)*(2/(2-q))*l;
#s = pl_f - pl_h;


//#l = omega_1/(1+v);
//#l = omega_1 - 1 -v;
//#l = 0.2*omega_1;
//#pie_bar = 1;

pl_h = p_h*s + p_f;                              
pl_f = p_h*s + p_f;                              
y_h = (1/(1-q))*(pl_h - p_h) + cw;
y_f = (1/(1-q))*(pl_f - p_f) + cw;
c_h = r*b + y_h - (1-n)*(s + p_f - p_h);
c_f = (-1)*(n/(1-n))*r*b + y_f + n*(s + p_f - p_h);
cw = c_h + c_f;
(2-q)*y_h = (1-q)*cw - c_h;
(2-q)*y_f = (1-q)*cw - c_f;
m_h - pl_h = c_h - delta*(r + pie_h(+1));
m_f - pl_f = c_f - delta*(r + pie_f(+1)) +xi_m;
pie_h = pl_h(+1)-pl_h;
pie_f = pl_f(+1)-pl_f;
                                     

    //test;
//#s = pl_f - pl_h;
//s = p_h - p_f; 
//s = - 1 - v;
//s = (v/(1+v))*omega_1;
//s = (v/(1+v)) + omega_1;				
//s = v + l                                 //Walsh p. 285
//b = ((1-n)/r)*(2/(2-q))*l;                //now b is a constant
//b/(1-n) = (q/(1-q))*s-l;                  //assuming we only look at one current account based on the literature and use eqn 6.33 for "b_h"
//b = y_h + (p_h - pl_h)- y_f + (1-n)*s;	//1page 284 define home current account balances
    //test end;

//AR1 shock (monetary);

xi_m = rho_m*xi_m(-1) + epsilon_m;

end;

steady;

check;

shocks;
var epsilon_m; stderr 0.25;

end;

stoch_simul(order=1,irf=40);