Behavior of capital

Today we use non-aggregate model and add technology change and make it fluctuate

according to some random process. We approximate the continuous random model:

by switching model with infinite many states in order:

.

.

.

where

.

.

.

for many states.

We calculate each policy function for each as it is set like:

independently for each i and calculate the next index number.

The random process can be

for as in 0818.

The random movement of technology change(A sample path of )

The corresponding capital movements

where the gap will not pile up because we usually do not use the same policy functions

in a row. The gap may become zero or very small in the middle.