To solve the model, by dening kt = Kt/Xt, mt = Mt/Xt. The dynamic system can be changed as follows: m = 1B k1gm, tMtt kt = BMkt(g+)kt1mt,k0given. The nondegenerate steady state is pinned down by the following algebraic equations 1B k1g=0,B k(g+)k 1m =0. Mt Mt tt The steady state can be solved as +g+ 1 1 k = BM ,m =[BMk (g+)k ], which can be proved as a saddle locally (Exercise). Wang, G. (CER at SDU) Advanced Macroeconomics

To solve the model, by defining kt=Kt/Xt,mt=Mt/Xt. The dynamic system can be changed as follows: mtkt=[1(BMkt1)g]mt,=BMkt(g+)kt1mt,k0given. The nondegenerate steady state is pinned down by the following algebrai equations 1(BMkt1)g=0,BMkt(g+)kt1mt=0. The steady state can be solved as k=[BM+g+]11,m=[BMk(g+)k], which can be proved as a saddle locally (Exercise). To solve the model, by defining kt=Kt/Xt,mt=Mt/Xt. The dynamic system can be changed as follows: mtkt=[1(BMkt1)g]mt,=BMkt(g+)kt1mt,k0given. The nondegenerate steady state is pinned down by the following algebrai equations 1(BMkt1)g=0,BMkt(g+)kt1mt=0. The steady state can be solved as k=[BM+g+]11,m=[BMk(g+)k], which can be proved as a saddle locally (Exercise)