// Example 1 from Collard's guide to Dynare
var y, c, k, a, h, b;
varexo e, u;

parameters beta, rho, alpha, delta, theta, psi, tau;

alpha = 0.36;
rho   = 0.95;
tau   = 0.025;
beta  = 0.99;
delta = 0.025;
psi   = 0;
theta = 2.95;

phi   = 0.1;

model;

  [name='optimal labour choice']
  c*theta*h^(1+psi)=(1-alpha)*y;

  [name='euler equation']
  k = beta*(((exp(b)*c)/(exp(b(+1))*c(+1)))
    *(exp(b(+1))*alpha*y(+1)+(1-delta)*k));

  [name='production function']
  y = exp(a)*(k(-1)^alpha)*(h^(1-alpha));

  [name='ressource constraint']
  k = exp(b)*(y-c)+(1-delta)*k(-1);

  [name='productivity shock']
  a = rho*a(-1)+tau*b(-1) + e;

  [name='preference shock']
  b = tau*a(-1)+rho*b(-1) + u;

end;

initval;
y = 1.08068253095672;
c = 0.80359242014163;
h = 0.29175631001732;
k = 11.08360443260358;
a = 0;
b = 0;
e = 0;
u = 0;
end;

resid(non_zero);
