how to use variables in postgresql

I HAVE A PROBLEM REGARDING DECLARATION/ INITIALISATION OF VARIABLES IN POSTGRESQL FUNCTIONS AND PROCEDURES. MY CODE PRESENTLY LOOKS LIKE
CREATE FUNCTION ins_into_std_values() RETURNS void AS
$BODY$
myflag CHAR(1) :='y';
dbms_output.put_line('enter the values sequentially');
loop
if myflag='n' then
exit;
end if;
insert into std_values
values('&tree_species_name','&location',&p,&c1,&c2,&q,&c3,&a,&b,&sp_gravity,&exp_factor);
commit;
dbms_output.put_line('records inserted sucessfully');
dbms_output.put_line('enter n to exit or y to continue entering values');
myflag:= '&y or n';
end loop;
commit;
$BODY$
LANGUAGE 'sql' VOLATILE;

BUT IT SHOWS ERROR AT INITIALISATION OF MYFLAG... CAN ANYONE TELL ME HOW TO DECLARE VARIABLES IN POSTGRESQL..