The risky steady state

Nicolas Coeurdacier (1) , Hélène Rey (2) , Pablo Winant (3)

1 ECON - Département d'économie (Sciences Po)
2 Department of Economics, Harvard University
3 CREST - Centre de Recherche en Économie et Statistique

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 stochastic income and stochastic interest rate.

Domains: Economics and Finance

Nicolas Coeurdacier, Hélène Rey, Pablo Winant. The risky steady state. 2011. ⟨hal-00972801⟩