function yf=forcst2(y0,horizon,dr,n)

% Copyright (C) 2008-2010 Dynare Team
%
% This file is part of Dynare.
%
% Dynare is free software: you can redistribute it and/or modify
% it under the terms of the GNU General Public License as published by
% the Free Software Foundation, either version 3 of the License, or
% (at your option) any later version.
%
% Dynare is distributed in the hope that it will be useful,
% but WITHOUT ANY WARRANTY; without even the implied warranty of
% MERCHANTABILITY or FITNESS FOR A PARTICULAR PURPOSE.  See the
% GNU General Public License for more details.
%
% You should have received a copy of the GNU General Public License
% along with Dynare.  If not, see <http://www.gnu.org/licenses/>.

global M_ options_

Sigma_e_ = M_.Sigma_e;
endo_nbr = M_.endo_nbr;
exo_nbr = M_.exo_nbr;
ykmin_ = M_.maximum_endo_lag;

order = options_.order;

k1 = [ykmin_:-1:1];
k2 = dr.kstate(find(dr.kstate(:,2) <= ykmin_+1),[1 2]);
k2 = k2(:,1)+(ykmin_+1-k2(:,2))*endo_nbr;

it_ = ykmin_ + 1 ;

% eliminate shocks with 0 variance
i_exo_var = setdiff([1:exo_nbr],find(diag(Sigma_e_) == 0));
nxs = length(i_exo_var);

chol_S = chol(Sigma_e_(i_exo_var,i_exo_var));

if ~isempty(Sigma_e_)
    e = randn(nxs,n,horizon);
end

B1 = dr.ghu(:,i_exo_var)*chol_S';

yf = zeros(endo_nbr,horizon+ykmin_,n);
yf(:,1:ykmin_,:,:) = repmat(y0,[1,1,n]);

j = ykmin_*endo_nbr;
for i=ykmin_+(1:horizon)
    tempx1 = reshape(yf(:,k1,:),[j,n]);
    tempx = tempx1(k2,:);
    yf(:,i,:) = dr.ghx*tempx+B1*squeeze(e(:,:,i-ykmin_));
    k1 = k1+1;
end

yf(dr.order_var,:,:) = yf;
yf=permute(yf,[2 1 3]);  
