GDP deflator and calibration

[jpfeifer]

What you describe is known as capital deepening. See

А model without balanced growth

There are a two issues here: Do you think that the non-balanced growth is a “steady state” feature or something that happens during the transition to a balanced growth path (e.g. catch-up growth)? I do not have much experience with models of the first class, featuring things like generalized balanced growth paths. Note also that countries like the US feature some (moderate) degree of capital deepening that is very hard to model in one-sector economies, but people consider this still to be cons…

It is mostly caused by the decline in the relative price of investment. There is no general rule how to deal with this.