DP8751 The Risky Steady-State
Author(s): | Nicolas Coeurdacier, Hélène Rey, Pablo Winant |
Publication Date: | January 2012 |
Keyword(s): | steady state |
JEL(s): | E10, F41 |
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.