Trend in DSGE model, Endogenous Productivity Growth

Hello everyone,

I’m trying to implement endogenous productivity growth in Iacoviello 2005 according to Anzoategui et al. 2019. (Online-appendix: Appendix) I am new to trends in DSGE models and I’m struggling to understand how the authors stationarize the model in the appendix (from p.10). How do I calculate steady state growth rates? How do I know which variables grow and need to be detrended and which not? Authors assume that A_t and Z_t grow at the same rate and that Y, C, K, I, G, w grow also at the same rate and I don’t understand calculation behind it.

Any help is appreciated. Please also suggest me literature about this topic. Thank you in advance!

This is a straightforward transformation into intensive form variables. Most textbooks should cover this for the case of the Solow model.

Thanks for your answer professor. In case of Solow model, transofrmaiton into intensive form means expressing variables in terms of per worker, but it is not the case for this paper. I’m still struggling to understand how is it straightforward exactly which variables grow, as authors of the paper mention on p.10 of the appendix, and at what rate they grow.

No, it means transformation into technology weighted workers. Even if there is no population growth, TFP growth still needs to be taken care of.