//verybasic
var y, r, int, pi, p, m; 

varexo e_m; 

parameters SIGMA, ETA, LAMBDA, PHI, BETA, THETA, RHO_M, KAPPA;

THETA = 3/4;
RHO_M = 1/2;
BETA = 0.99;
SIGMA = 1;
PHI = 1;
ETA = 1;
LAMBDA = ((1-THETA)*(1-BETA*THETA))/THETA;
KAPPA = LAMBDA*(SIGMA+PHI);

model;
r = int - pi(+1);
m-p = y - (ETA*int);
y*(1+(1/(SIGMA*ETA) = y(+1)+((1/SIGMA)*pi(+1))+(1\(SIGMA*ETA))*(m-p);
(-1*KAPPA*y)+ pi = BETA*pi(+1);
-pi + m(-1)-p(-1) - (m-p) + m-m(-1)=0;
m - m(-1)= RHO_M*((m(-1)*m(-2));
end;

initval;
y     = 0;
pi    = 0;
int   = 0;
r     = 0;
e_m   =0;
m     =0;
end;

steady;
check;

shocks;
var e_m; stderr 0.25;
end;         

stoch_simul(irf=12,  order=1);