var c k y B h A y_h i w r g_A g_B;
varexo eps_a eps_b;

parameters delta psi alpha beta ;

% Parameter Values 

beta = 0.95;        
psi = 0.33;          
alpha = 0.68;         
delta = 0.05; 



Model;    

y = k(-1)^(1-alpha)*exp(eps_a+eps_b)^(alpha-1)*h^alpha;            
g_A=eps_a;
g_B=eps_b;
log(A)=log(A(-1)) + eps_a;                                                                      
log(B)=log(B(-1)) + eps_b;                                                                     
r = (1-alpha)*(y/k(-1))*exp(eps_a+eps_b);    
w= alpha*y/h;                                           
c^(-1)= exp(eps_a(+1)*eps_b(+1))^(-1)*beta*c(+1)^(-1)*(1+r(+1)-delta);   
h^(1/psi)*B^(-1) = c^(-1)*w;                                             
y_h = y/h;                                                         
c + k = y + (1-delta)*k(-1)*exp(eps_a+eps_b)^(-1);             
i = y-c;
end; 




steady_state_model;
A=1;
B=1;
r=(1/beta)-(1-delta);
y_k=r/(1-alpha);
k_y=(1-alpha)/r;
i_y=(1/y_k)*delta;
c_y=1-i_y;
h= (alpha*1/c_y)^(psi/(1+psi));
k=((h^alpha)/y_k)^(1/alpha);
y=k^(1-alpha)*h^alpha;
c=c_y*y;
i=i_y*y;
w=alpha*(y/h);
y_h =y/h;

end;



shocks;
var eps_a; stderr 1; 
var eps_b; stderr 1;
end;
resid(1);
steady;
check;


stoch_simul(order=1,loglinear, periods=1000,drop=960) y h c w y_h i g_A g_B;


// Rebuild non-stationary time series by remultiplying with A_{t} and B_{t} 

log_A_0=0; //Initialize Level of Technology at t=0;
log_B_0=0; //Initialize Level of Technology at t=0;
log_A(1,1)=log_A_0 ; //Level of Tech. after shock in period 1
log_B(1,1)=log_B_0; //Level of Tech. after shock in period 1 

// reaccumulate the non-stationary level series

for ii=1:options_.periods
    log_A(ii+1,1)=log_A(ii,1)+g_A(ii,1);
    log_B(ii+1,1)=log_B(ii,1)+g_B(ii,1);;
    y_nonstationary(ii+1,1)=y(ii,1)+log_A(ii,1)+log_B(ii,1);
    h_nonstationary(ii+1,1)=h(ii,1)+log_B(ii,1);
    c_nonstationary(ii+1,1)=c(ii,1)+log_A(ii,1)+log_B(ii,1);
    w_nonstationary(ii+1,1)=w(ii,1)+log_A(ii,1)+log_B(ii,1);
    y_h_nonstationary(ii+1,1)=y_h(ii,1)+log_A(ii,1)+log_B(ii,1);
end