%%DYNARE CODES FOR MASTER


var k, z, c, Y, r, rtilde, R, q, w, wtilde, b, taok, z_idf, phi_A, phi_B, PHI_A, PHI_B, P_A, P_B, v_D, psi, theta, miu;

varexo epis;

parameters alpha, delta, beta, rho, sigma, m_g, taon, eta, lambda;

beta=0.98;

alpha=0.32;

delta=0.1;

rho=0.95;

sigma=0.007;

m_g=0.2;               %    Ratio of government expenditure to GDP

taon = 0.3;

eta=0;  

lambda=2;

model;

r = alpha*z*k(-1)^(alpha-1);

rtilde = (1-taok)*alpha*k^(alpha-1);

R = 1+z*rtilde(-1)-delta;

Y =z*k(-1)^alpha;

w = (1-alpha)*Y;

wtilde = (1-taon)*w;

z_idf=(1/q-1+delta)/rtilde;

phi_A = normpdf((log(z_idf)-rho*log(z))/sigma);

PHI_A = normcdf((log(z_idf)-rho*log(z))/sigma);

P_A = 1+(lambda-1)* PHI_A;

phi_B = normpdf((log(z_idf)-rho*log(z)-sigma^2)/sigma);

PHI_B = normcdf((log(z_idf)-rho*log(z)-sigma^2)/sigma);

P_B = 1+(lambda-1)* PHI_B;

v_D = (1-delta-1/q)*P_A+z^rho*exp(sigma^2/2)*rtilde*P_B;

c+k+m_g*Y=Y+(1-delta)*k(-1);

m_g*Y+b(-1)+wtilde+z*rtilde(-1)*k(-1)=Y+q*b;


R(+1)/c(+1)+eta*v_D=1/(beta*c);

q/c=beta/c(+1);

((lambda-1)*((1-delta-1/q)*phi_A+z^rho*exp(sigma^2/2)*rtilde*phi_B)/(sigma*(1/q-1+delta))-P_A)*eta*(k+miu)/(beta*c)+1/c(+1)+beta*psi(+1)*b(+1)/c(+2)=(miu*R(+1)+psi*c*b-miu(+1))/(c(+1)^2)+theta(+1)+((lambda-1)*((1-delta-1/q(+1))*phi_A(+1)+z(+1)^rho*exp(sigma^2/2)*rtilde(+1)*phi_B(+1))/(sigma*(1/q(+1)-1+delta))-P_A(+1))*eta*(k(+1)+miu(+1))*c(+2)/(c(+1)^2)

theta/beta= theta(+1)*(r(+1)+1-delta)+psi(+1)*(r(+1)-z(+1)*rtilde)+eta*v_D;

((lambda-1)*((1-delta-1/q)*phi_A+z^rho*exp(sigma^2/2)*rtilde*phi_B)/(sigma*rtilde)-z^rho*exp(sigma^2/2)*P_B)*eta*(k+miu)=z(+1)*(miu/c(+1)-psi(+1)*k);

psi*c=psi(+1)*c(+1);

log(z)=rho*log(z(-1))+sigma*epis;

end;

initval;

taok = 0;
r = 0.12;
rtilde = (1-taok)*alpha*k^(alpha-1);
R=1+rtilde-delta;
z = 1;
q = beta;
k = 1.84;
c =  0.7;
Y = k^alpha;
w = (1-alpha)*Y;
wtilde = (1-taon)*w;
z_idf=(1/q-1+delta)/rtilde;
b = (Y-wtilde+rtilde*k-m_g*Y)/(1-q);
phi_A = normpdf((log(z_idf)-rho*log(z))/sigma);

PHI_A = normcdf((log(z_idf)-rho*log(z))/sigma);

P_A = 1+(lambda-1)* PHI_A;

phi_B = normpdf((log(z_idf)-rho*log(z)-sigma^2)/sigma);

PHI_B = normcdf((log(z_idf)-rho*log(z)-sigma^2)/sigma);

P_B = 1+(lambda-1)* PHI_B;

v_D = (1-delta-1/q)*P_A+z^rho*exp(sigma^2/2)*rtilde*P_B;
theta = -0.4;

psi = 2;

miu=4;

end;


shocks;

var epis;
stderr 1;

end;

steady;
solve_algo=1;

stoch_simul (drop = 100, periods = 1000, irf=0, order=1);