var epsilon p s m_d y_d y t_bill;
varexo t_bill_star p_star epsilon_bar y_bar g m;
parameters delta, eta, psi, phi;

delta=0.5;
eta=1;
psi=0.5;
phi=0.5;
rho=0.95;

model; 
t_bill     = t_bill_star + s(+1) - s;
m_d        = p(-1) + phi*y - eta*t_bill;
epsilon    = s + p_star - p;
y_d        = y_bar + delta*(s + p_star - p(-1) - epsilon_bar) + g;
p - p(-1)  = psi*(y_d - y_bar) + s(+1) - s;
y_d        = y;
m_d        = m;
end;

initval;
epsilon_bar = 1;
epsilon     = 1;
y_bar       = 1;
p_star      = 1;
p           = 1;
t_bill_star = 0.5;
t_bill      = 0.5;
m           = 1;
m_d         = 1;
g           = 0;
end;

steady;

check;

varobs s t_bill p y;

estimated_params;
delta, beta_pdf, 0.35, 0.02;
eta, beta_pdf, 0.99, 0.002;
psi, beta_pdf, 0.25, 0.05;
phi, beta_pdf, 0.30, 0.04;
stderr m, gamma_pdf, 0.1, 1;
stderr t_bill_star, gamma_pdf, 0.1, 1;
stderr g, gamma_pdf, 0.1, 1;
stderr y_bar, gamma_pdf, 0.1, 1;
end;

estimation(datafile=dornbuschdata,nobs=60,first_obs=1,mh_replic=5000,mh_drop=0.45,mh_jscale=0.35,mode_compute=6,forecast=24);