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.