%TVCC_VARIABLES.M
function [rL, rH, laL, laH, hL, hH, yL, yH, cL, cH, apL, apH, bettaL, bettaH] = tvcc_variables(laL_o_rL, laH_o_rH, qL, qH, a, DL, DH);
%[rL, rH, laL, laH, hL, hH, yL, yH, cL, cH, apL, apH, bettaL, bettaH] = tvcc_variables(laL_o_rL, laH_o_rH, qL, qH, a, DL, DH);  Given  U(c_t,h_t)/R_t and q_t, this program returns hours output, the marginal utility of consumption, consumption, next-period debt, and the discount factor. The subscripts L and H refer to low and high states of technology. 
%For a description of the underlying economic model, see ``Individual Versus Aggregate Collateral Constraints and the Overborrowing Syndrome,'' by Martin Uribe, April 2006.  
%(c) Martin Uribe, April 27, 2006.
%Calls tvcc_ss.m

 

%Deep parameters and steady-state values
[RSTAR, SIG, OMEGA, BETTA1, ALFA, MU, z, PAIZ, KAPA, Kss,  QQss, Css, Hss, LAss, Ass, Yss, BETTAss] = tvcc_ss;

%Possible realizations of productivity shock
zL = z(1);
zH = z(2);

%grid length
m = length(laL_o_rL);

%Assume collateral constraint does not bind
rL = ones(m,1)*RSTAR;
rH = ones(m,1)*RSTAR;

%Marginal utility of consumption
laL = laL_o_rL.*rL;
laH = laH_o_rH .*rH;

%hours
hL = ( (1-ALFA) * exp(zL) * Kss^(ALFA) ) .^(1/(OMEGA+ALFA-1));
hH = ( (1-ALFA) * exp(zH) * Kss^(ALFA) ) .^(1/(OMEGA+ALFA-1));

%Output
yL = exp(zL) * Kss^ALFA * hL.^(1-ALFA);
yH = exp(zH) * Kss^ALFA * hH.^(1-ALFA);

%Consumption
cL = laL.^(-1/SIG) + hL^OMEGA/OMEGA;
cH = laH.^(-1/SIG) + hH^OMEGA/OMEGA;

%Next period's external debt
apL = RSTAR .* (a + cL - yL);
apH = RSTAR .* (a + cH - yH);

%Make sure next period's debt is within grid
apL = max(apL,DL);
apL = min(apL,DH);
apH = max(apH,DL);
apH = min(apH,DH);

%States in which collateral constraint is violated
ccvL = find(apL>KAPA*qL*Kss);
ccvH = find(apH>KAPA*qH*Kss);

%Impose collateral constraint
apL(ccvL) = KAPA*qL(ccvL)*Kss;
apH(ccvH) = KAPA*qH(ccvH)*Kss;

%consumption
cL = apL./RSTAR-a+yL;
cH = apH./RSTAR-a+yH;

%Discount factor
bettaL = (1+cL-hL.^OMEGA/OMEGA).^(-BETTA1);
bettaH = (1+cH-hH.^OMEGA/OMEGA).^(-BETTA1);

%Marginal utility of consumption
laL = (cL-hL.^OMEGA/OMEGA).^(-SIG);
laH = (cH-hH.^OMEGA/OMEGA).^(-SIG);

%Interest rate
rL = laL ./ laL_o_rL;
rH = laH ./ laH_o_rH;