var cx vatx vat w wx;

varexo payroll payrollx;

parameters alpha lambda delta deltax sigma eta alphax lambdax n epsilon; 

sigma = 1; // Risk aversion
n = 0.4; // Country size
eta = 2; // Inverse of labor supply elasticity
epsilon = 6; // Elasticity of substitution between varieties
lambda = 0.6; // Share of tradadables in Home total consumption
lambdax = 0.6; // Share of tradables in Foreign total consumption
alpha = 0.25; // Foreign bias in Home tradable consumption
alphax = 0.25; // Home bias in Foreign tradable consumption
delta = 0.24; // Home share of government consumption in total Home output
deltax = 0.19; // Foreign share of government consumption in total Foreign output

model;

w = ((epsilon-1)/epsilon)/(1+payroll);
wx = ((epsilon-1)/epsilon)/(1+payrollx);
0 = (((((1-delta)/(alpha*lambda*(deltax-1)))*((1-n)^((sigma+eta)/eta))*((wx/(1+vatx))^(1/eta))
*(1-(1-alphax*lambdax)*deltax))-(1/(alphax*lambdax*deltax))*(n^((sigma+eta)/eta))*((w/(1+vat))^(1/eta))*
(((n/(1-n))*(((1+vatx)/(1+vat))^(1/sigma)))^(-sigma/eta))*(1-(1-alpha*lambda)*delta)+(1/(alphax*lambdax
*deltax))*(1-lambda)*(((n/(1-n))*(((1+vatx)/(1+vat))^(1/sigma)))^(-sigma/eta)))/
((((1-delta)/(alpha*lambda*(deltax-1)))*(1-alphax*lambdax))+((1-delta)/(alpha*lambda*(deltax-1)))*alpha*lambda
*((n/(1-n))*(((1+vatx)/(1+vat))^(1/sigma)))-((alphax*lambdax)/(alphax*lambdax*deltax))+((1-delta)/(alpha*lambda*(deltax-1)))*
((alpha*lambda)/(1-delta))*((n/(1-n))*(((1+vatx)/(1+vat))^(1/sigma))+1)))^(eta/(sigma+eta)); % Relationship between cx, vat and vatx obtained from labor markets and goods markets equilibria

0 = vatx*((1+vatx)^(1/eta))-(deltax-payrollx*wx)*((1-n)^((sigma+eta)/eta))*(wx^(1/eta))*cx^(-(sigma+eta)/eta); % Relationship between cx, vat and vatx obtained from Home government budget constraint
0 = vat*(((1+vatx)/(1+vat))^(1/sigma))*(n/(1-n))*cx-(delta-payroll*w)*(n^((sigma+eta)/eta))*((w/(1+vat))^(1/eta))*
((n/(1-n))^(-sigma/eta))*(((1+vatx)/(1+vat))^(-1/eta))*(cx^(-sigma/eta)) ; % Relationship between cx, vat and vatx obtained from Foreign government budget constraint

end;

steady_state_model;

w = ((epsilon-1)/epsilon)/(1+payroll);
wx = ((epsilon-1)/epsilon)/(1+payrollx);
[cx, vat, vatx] = deval_steady_state_helper(alpha,lambda,delta,deltax,sigma,eta,alphax,lambdax,n); 

end;

initval;
payroll = 0;
payrollx = 0;
end;

steady;

endval;
payroll = 0.1;
payrollx = 0.2;
end;

steady;