var k, y, L, c, A, a; varexo epsilon; parameters beta, theta, tau, alpha, psi, delta, rho, Astar; beta = 0.99; theta = 0.357; tau = 2; alpha = 0.45; psi = -0.1; delta = 0.02; rho = 0.8; Astar = 1; model; a = rho*a(-1) + epsilon; A = Astar*exp(a); y = A*(alpha*k(-1)^psi+(1-alpha)*L^psi)^(1/psi); k = y-c + (1-delta)*k(-1); (1-theta)/theta*c/(1-L) - (1-alpha)*(y/L)^(1-psi); (c^theta*(1-L)^(1-theta))^(1-tau)/c = beta*(c(+1)^theta*(1-L(+1))^(1-theta))^(1-tau)/c(+1)*(alpha*(y(+1)/k)^(1-psi)+1-delta); end; steady_state_model; a = epsilon/(1-rho); A = Astar*exp(a); Output_per_unit_of_Capital=((1/beta-1+delta)/alpha)^(1/(1-psi)); Consumption_per_unit_of_Capital=Output_per_unit_of_Capital-delta; Labour_per_unit_of_Capital=(((Output_per_unit_of_Capital/A)^psi-alpha)/(1-alpha))^(1/psi); Output_per_unit_of_Labour=Output_per_unit_of_Capital/Labour_per_unit_of_Capital; Consumption_per_unit_of_Labour=Consumption_per_unit_of_Capital/Labour_per_unit_of_Capital; % Compute steady state of the endogenous variables. L=1/(1+Consumption_per_unit_of_Labour/((1-alpha)*theta/(1-theta)*Output_per_unit_of_Labour^(1-psi))); c=Consumption_per_unit_of_Labour*L; k=L/Labour_per_unit_of_Capital; y=Output_per_unit_of_Capital*k; end; initval; epsilon = 0; end; steady; endval; epsilon = (1-rho)*log(1.05); end; steady; shocks; var epsilon; periods 1:5; values 0; end; perfect_foresight_setup(periods=300); perfect_foresight_solver; rplot c; rplot k;