Calibration of Models with Multi-Year Periods

n denote the number of years per period, r denote the annual interest rate, r denote the per period interest rate, r = (1 + r) n − 1, δ, δ denote the annual and per period capital depreciation rates δ = (1 − δ) n − 1, g, g denote the annual and per period steady-state growth rates, R denote the base year capital earnings, I denote base year investment. The model we will calibrate involves investments in period t maturing in both periods t and t + 1. We assume that the base year investment of I produces A units of capital for use in the first period (during the first n years) and 1