I saw this formula in DSGE papers to calculate the steady state of Capital rate.My question is that how this equation is derived?
delta is depreciation rate in economy.
Rk is steady state of capital rate.
Rn is steady state of bonds rate.
I know that Rn=1/beta
This equation’s answer is
Where did you get the equation from. Usually, the core relation is that the net return to capital in steady state needs to equal the net return on bonds.
That return on bonds is 1/\beta-1. The return on capital is the rental rate on capital minus the depreciation rate R-\delta.
Without knowing the definition of your variables above it is impossible to tell where your equation comes from.
Thank you so much professor.
My problem solved.