My low depreciation rate stems from the fact that I have a growth model hence I am subtracting from the steady state capital depreciation rate the growth rate of my economy.
Here are the equations at BGP,
depreciation rate = (investment/capital stock) - growth rate of the economy
This gives a depreciation rate of 0.025
The rental rate of capital is given at BGP by the following equation,
g is the growth rate of my economy, beta the actualisation rate, delta the depreciation rate and tau k the capital tax.
I have an actualisation rate of 0.983, so it is not that low. I calibrated it from the capital Euler equation and the capital demand.
The rental rate of capital is at 7.9%.
I don’t see how I could change the calibration. What would you recommend?
Thank you again, very helpful.