diff --git a/matlab/+pac/+estimate/iterative_ols.m b/matlab/+pac/+estimate/iterative_ols.m
index fe421ae18..fdf95fa82 100644
--- a/matlab/+pac/+estimate/iterative_ols.m
+++ b/matlab/+pac/+estimate/iterative_ols.m
@@ -129,7 +129,11 @@ end
 if is_non_optimizing_agents
     dataForNonOptimizingBehaviour = dseries();
     for i=1:length(non_optimizing_behaviour.vars)
-        variable = M_.endo_names{non_optimizing_behaviour.vars(i)};
+        if non_optimizing_behaviour.isendo(i)
+            variable = M_.endo_names{non_optimizing_behaviour.vars(i)};
+        else
+            variable = M_.exo_names{non_optimizing_behaviour.vars(i)};
+        end
         if non_optimizing_behaviour.lags(i)
             dataForNonOptimizingBehaviour = [dataForNonOptimizingBehaviour, data{variable}.lag(non_optimizing_behaviour.lags(i))];
         else
diff --git a/preprocessor b/preprocessor
index effa40543..2312ce13d 160000
--- a/preprocessor
+++ b/preprocessor
@@ -1 +1 @@
-Subproject commit effa40543e816507187fe90da340fd76be2dc237
+Subproject commit 2312ce13dc58d3645e0f37f1a757fbe50b6932fd
diff --git a/tests/Makefile.am b/tests/Makefile.am
index 5c2862060..82f1b764d 100644
--- a/tests/Makefile.am
+++ b/tests/Makefile.am
@@ -425,6 +425,7 @@ MODFILES = \
     pac/trend-component-20-1/example.mod \
     pac/trend-component-20-2/example.mod \
     pac/trend-component-20-3/example.mod \
+    pac/trend-component-20-4/example.mod \
     ecb/backward-models/irf/solow_1.mod \
     ecb/backward-models/irf/solow_2.mod \
 	dynare-command-options/ramst.mod
diff --git a/tests/pac/trend-component-20-4/clean b/tests/pac/trend-component-20-4/clean
new file mode 100755
index 000000000..cf3492a28
--- /dev/null
+++ b/tests/pac/trend-component-20-4/clean
@@ -0,0 +1,8 @@
+#!/bin/sh
+
+rm -rf example
+rm  -rf +example
+rm -f example.log
+rm -f *.mat
+rm -f *.m
+rm -f *.dat
diff --git a/tests/pac/trend-component-20-4/example.mod b/tests/pac/trend-component-20-4/example.mod
new file mode 100644
index 000000000..284d88b2c
--- /dev/null
+++ b/tests/pac/trend-component-20-4/example.mod
@@ -0,0 +1,72 @@
+// --+ options: json=compute, stochastic +--
+
+// Check that the content of pac.[pacmodel].equations.[eqtag].non_optimizing_behaviour.vars is correct.
+
+var x1 x2 x1bar x2bar z y x;
+
+varexo ex1 tt ex2 ex1bar ex2bar ez ey ex;
+
+parameters
+       rho_1 rho_2 rho_3 rho_4
+       a_x1_0 a_x1_1 a_x1_2 a_x1_x2_1 a_x1_x2_2
+	   a_x2_0 a_x2_1 a_x2_2 a_x2_x1_1 a_x2_x1_2
+	   e_c_m c_z_1 c_z_2 beta
+       lambda;
+
+rho_1 =  .9;
+rho_2 = -.2;
+rho_3 =  .4;
+rho_4 = -.3;
+
+
+a_x1_0 =  -.9;
+a_x1_1 =  .4;
+a_x1_2 =  .3;
+a_x1_x2_1 = .1;
+a_x1_x2_2 = .2;
+
+a_x2_0 =  -.9;
+a_x2_1 =   .2;
+a_x2_2 =  -.1;
+a_x2_x1_1 = -.1;
+a_x2_x1_2 = .2;
+
+beta  =  .2;
+e_c_m =  .5;
+c_z_1 =  .2;
+c_z_2 = -.1;
+
+lambda = 0.5; // Share of optimizing agents.
+
+trend_component_model(model_name=toto, eqtags=['eq:x1', 'eq:x2', 'eq:x1bar', 'eq:x2bar'], targets=['eq:x1bar', 'eq:x2bar']);
+
+pac_model(auxiliary_model_name=toto, discount=beta, model_name=pacman);
+
+model;
+
+[name='eq:y']
+y = rho_1*y(-1) + rho_2*y(-2) + ey;
+
+[name='eq:x']
+x = rho_3*x(-1) + rho_4*x(-2) + ex;
+
+[name='eq:x1']
+diff(x1) = a_x1_0*(x1(-1)-x1bar(-1)) + a_x1_1*diff(x1(-1)) + a_x1_2*diff(x1(-2)) + a_x1_x2_1*diff(x2(-1)) + a_x1_x2_2*diff(x2(-2)) + ex1;     
+
+[name='eq:x2']
+diff(x2) = a_x2_0*(x2(-1)-x2bar(-1)) + a_x2_1*diff(x1(-1)) + a_x2_2*diff(x1(-2)) + a_x2_x1_1*diff(x2(-1)) + a_x2_x1_2*diff(x2(-2)) + ex2;     
+
+[name='eq:x1bar']
+x1bar = x1bar(-1) + ex1bar;
+
+[name='eq:x2bar']
+x2bar = x2bar(-1) + ex2bar;
+
+[name='zpac']
+diff(z) = lambda*(e_c_m*(x1(-1)-z(-1)) + c_z_1*diff(z(-1))  + c_z_2*diff(z(-2)) + pac_expectation(pacman)) + (1-lambda)*(y + x + tt) + ez;
+
+end;
+
+if ~isequal([M_.endo_names(M_.pac.pacman.equations.eq0.non_optimizing_behaviour.vars(M_.pac.pacman.equations.eq0.non_optimizing_behaviour.isendo)); M_.exo_names(M_.pac.pacman.equations.eq0.non_optimizing_behaviour.vars(~M_.pac.pacman.equations.eq0.non_optimizing_behaviour.isendo))], {'y'; 'x'; 'tt'})
+   error('PAC non_optimizing_behaviour.vars and/or non_optimizing_behaviour.isendo fields are wrong.')
+end
\ No newline at end of file