Code with Financial Accelerator

[jpfeifer]

Please see

Steady state in BGG 1999

Has anybody ever replicated the steady state in the financial accelerator paper from BGG (1999)? According to BGG they want a steady state threshold value that implies an annual bankruptcy rate of 3%. Given that the threshold is log normally distributed with the moment conditions they describe this should give a threshold value of 0.4936 (adjusted so that we can work with quarterly rates, as in the paper). BGG also declare that the annual spread between the return on capital and the risk free r…

And yes, your intuition seems correct (if we are talking about net rates up to first order)