Question on calibration of discount factor

[jpfeifer]

1. Usually, the literature will guide you on realistic values. But before doing that, you should think hard about whether a model approximated in the neighborhood of a balanced growth path is the right model for your economy. It seems you are rather far away from the steady state.
2. Again, you are confusing the data mean and the steady state. Take the Solow or Ramsey model starting with a capital intensity below steady state. In this case, the average growth rate will be higher than the steady state growth rate due to capital accumulation. See also

Govt Borrowing Negative at Steady State?

I was referring to Domar’s 1944 article. See e.g. bondeconomics.com/2014/11/burden-of-government-debt-part-i-domars.html Regarding your underlined part: you need to be careful to not confuse dynamics with the steady state. If you start with the Solow model, you would expect catch-up growth, i.e. the observed growth rates would be bigger than the growth rate you would expect along the balanced growth path. Another thing is the difference between the pure discount factor and the growth adjusted d…

3. That growth adjustment is necessary when you not have log utility. See

Govt Borrowing Negative at Steady State?

Ok, yes. I see. It is indeed that case that if the growth adjusted real interest rate R/(pi*g) is smaller than 1, then you can only have a steady state if beta is bigger than 1. But then again, there is the question of beta being growth adjusted. But the growth adjustment is only relevant if you are not having log utility. With log utility, there is no adjustment for beta. Regarding a reference, Romer’s textbook covers this in continuous time in section 2.2. I have just sent you my own lecture …