DP8751 The Risky Steady-State
|Author(s):||Nicolas Coeurdacier, Hélène Rey, Pablo Winant|
|Publication Date:||January 2012|
|Programme Areas:||International Macroeconomics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=8751|
We propose a simple quantitative method to linearize around the risky steady state of a small open economy. Unlike when the deterministic steady state is used, the net foreign asset position is well defined. We allow for both stochastic income and stochastic interest rate.