A dividend process with independent shocks both to the current level of dividends d_{t} and to the expected long-run rate of growth of dividends g_{t}:

Why this dividend process? Because if we then have an required expected rate of return r and a value function V(r_{t},g_{t}, then the one-period arbitrage condition:

leads us to the highly-tractable Gordon equation:

Thus we can have big swings in the desired capital stock and thus bigger swings in the desired rate of change of investment *without* having to have massive shocks to the current level of technology: we can have depressions without requiring--as is usual in real business-cycle models--massive technological amnesia.