diff --git a/tests/ep/rbcii.mod b/tests/ep/rbcii.mod
index 02c7cb712..186679731 100644
--- a/tests/ep/rbcii.mod
+++ b/tests/ep/rbcii.mod
@@ -1,6 +1,6 @@
 @#define extended_path_version = 1
 
-var Capital, Output, Labour, Consumption,  Investment, Output1, Labour1, Consumption1, Output2, Labour2, Consumption2, Efficiency, efficiency, ExpectedTerm;
+var Capital, Output, Labour, Consumption,  Investment, Output1, Labour1, Consumption1, Output2, Labour2, Consumption2, Efficiency, efficiency, ExpectedTerm, LagrangeMultiplier;
 
 varexo EfficiencyInnovation;
 
@@ -10,29 +10,27 @@ parameters beta, theta, tau, alpha, psi, delta, rho, effstar, sigma;
 ** Calibration
 */
 
-
 beta    =  0.990;
 theta   =  0.357;
 tau     =  2.000;
 alpha   =  0.450;
-psi     = -0.500;
+psi     = -0.200;
 delta   =  0.020;
-rho     =  0.995;
+rho     =  0.800;
 effstar =  1.000;
 sigma   =  0.100;
 
-
-rho = 0.800;
-
 model(use_dll);
 
   efficiency = rho*efficiency(-1) + sigma*EfficiencyInnovation;
 
-  Efficiency = effstar*exp(efficiency-.5*sigma*sigma/(1-rho*rho));
+  Efficiency = effstar*exp(efficiency);
 
-  (((Consumption1^theta)*((1-Labour1)^(1-theta)))^(1-tau))/Consumption1 - ExpectedTerm(1);
+  (((Consumption1^theta)*((1-Labour1)^(1-theta)))^(1-tau))/Consumption1 - beta*ExpectedTerm(1) + LagrangeMultiplier(1)*beta*(1-delta);
 
-  ExpectedTerm = beta*((((Consumption^theta)*((1-Labour)^(1-theta)))^(1-tau))/Consumption)*(alpha*((Output/Capital(-1))^(1-psi))+1-delta);
+  ExpectedTerm = ((((Consumption^theta)*((1-Labour)^(1-theta)))^(1-tau))/Consumption)*(alpha*((Output/Capital(-1))^(1-psi))+1-delta);
+
+  LagrangeMultiplier = max(0, (((Consumption^theta)*((1-Labour)^(1-theta)))^(1-tau))/Consumption - beta*ExpectedTerm(1) + LagrangeMultiplier(1)*beta*(1-delta));
 
   ((1-theta)/theta)*(Consumption1/(1-Labour1)) - (1-alpha)*(Output1/Labour1)^(1-psi);
 
diff --git a/tests/ep/rbcii_steady_state.m b/tests/ep/rbcii_steady_state.m
index 69b6fcfc7..5fc2dcb1a 100644
--- a/tests/ep/rbcii_steady_state.m
+++ b/tests/ep/rbcii_steady_state.m
@@ -35,7 +35,7 @@ function [ys_, params, info] = rbcii_steadystate2(ys_, exo_, params)
     ys_(5)=params(6)*ys_(1);
     
     % Steady state level of the expected term appearing in the Euler equation
-    ys_(14)=params(1)*(ys_(4)^params(2)*(1-ys_(3))^(1-params(2)))^(1-params(3))/ys_(4)*(1+params(4)*(ys_(2)/ys_(1))^(1-params(5))-params(6));
+    ys_(14)=(ys_(4)^params(2)*(1-ys_(3))^(1-params(2)))^(1-params(3))/ys_(4)*(1+params(4)*(ys_(2)/ys_(1))^(1-params(5))-params(6));
 
     % Steady state level of output in the unconstrained regime (positive investment)
     ys_(6)=ys_(2);