SBP Working Paper Series STATE BANK OF PAKISTAN

0.90
0.91
0.92
0.93
0.94
0.95
0.96
0.97
0.98
0.99
1.00
i_y
P
P
p
=
Pmc
p
1
p
=
1 MC
p
(A.13)
inv
Calibration of as a function of
y
i
In order to utilize steady state investment-output ration for calibration of , we need to express as a function of .
y
end, we substitute of h from (A.07) in capital-labour ratio (A.03)
k w
=
k
1
1
r
inv
A1
y
inv w
1 =
k
y Ar k
inv
w
f ( )
=1
k
y
Ar k
= (A.14)
Since w ,
expresses
To this
k
r and k have already been found as functions of along with other structural parameters. Therefore, (A.14)
inv as a function of .
y
Figure A1: The relationship between β and Steady State investment to output ratio
0.50
0.45
0.40
0.35
0.30
0.25
0.20
0.15
0.10
0.05
0.00
i_y=f(β)
β
i_y*=20%
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