var x R pi r u;
nx=1;
nR=2;
npi=3;
nr=4;
nu=5;
varexo eps_r eps_u;
parameters sigma beta kappa omega gamma rhor rhou;
sigma=1.5;
beta=0.995;
kappa=0.02;
omega=0.5;
gamma=0.5;
rhor=0.5;
rhou=0.5;
model(linear);
%IS
x=x(+1)-(1/sigma)*(R-pi(+1)-r);
%PC
pi=beta*pi(+1)+kappa*x+u;
%Optimal policy
x=(sigma*gamma/omega)*R-(kappa/omega)*pi;
r=rhor*r(-1)+eps_r;
u=rhou*u(-1)+eps_u;
end;
shocks;
var eps_r; stderr 1;
var eps_u; stderr 1;
end;
stoch_simul(order=1,irf=10,nograph);
Loss = (1/2)*(oo_.var(npi,npi)+omega*oo_.var(nx,nx)+gamma*oo_.var(nR,nR));
disp('Loss')
disp(Loss)