var v1 v2;
varexo eps1 eps2;

parameters rho11 rho12 eta;

rho11 = 0.8;
rho12 = 0.1;
eta   = 0.2;

model;
   v1 = rho11*v1(-1) + rho12*v2(-1) + eta*eps1;
   v2 = rho12*v1(-1) + rho11*v2(-1) + eta*eps2;
end;

shocks ;
   var eps1 = 1;
   var eps2 = 1;
   corr eps1, eps2 = 0.3;
end;

steady;

check;

% simulation
stoch_simul(periods=1000,order=1,nograph);
save simdata v1 v2;

% estimation
varobs v1 v2;

% Bayesian estimation
estimated_params;
   rho11, beta_pdf, 0.7, 0.1;
   rho12, beta_pdf, 0, 0.05, -1, 1;
   eta, inv_gamma_pdf, 0.05, Inf;
   corr eps1, eps2, 0.4, beta_pdf, 0, 0.3, -1, 1;
end;
options_.mh_nblck     = 4;
options_.mh_replic    = 10000;
options_.mh_jscale    = 1.4;
options_.mode_compute = 1;
% estimation(datafile=simdata,mode_check);

identification(advanced=1);