var inf mc;

varexo u e;

parameters lambda_b lambda_f theta rho_1;

lambda_b= 0.3;
lambda_f= 0.6;
theta= 0.2;
rho_1= 0.8;

model(linear);
mc - rho_1*mc(-1) - u;
inf - lambda_b*inf(-1) - lambda_f*inf(+1) - theta*mc - e;

end;

initval;
inf=0;
mc=0;
end;

endval;
inf=0;
mc=0;
end;

shocks;
var u = 0.1;
var e = 0.1;
end;

//steady;
//check;


estimated_params;

lambda_b, 0.3;
lambda_f, 0.6;
theta, 0.2;
rho_1, 0.8;

stderr u, 0.1, 0, 100;
stderr e, 0.1, 0, 100;
end;

varobs inf, mc;

// stoch_simul(periods=140);

estimation(datafile=KLEM1996,first_obs=1,nobs=38);