Christiano, Lawrence J. (contributor); … - 2007
autoregression:
s
t
= Ps
t−1
+u
t
,Eu
t
u
0
t
= D, (23)
9
Here, we use the fact that an entrepreneur’s rate of utilization, u
t
, is …
to optimize discounted profits:
E
t
∞
X
j=0
¡
βξ
p
¢
j
λ
t+j
£
P
i,t+j
Y
i,t+j
−P
t+j
s
t+j
¡
Y
i,t+j
+Φz
∗
t+j
¢¤
. (6 … t, capital producers purchase investment goods, I
t
,andinstalledphysical
capital, x, that has been used in period t …