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The risky steady state

  • Pablo Winant

    (Centre de Recherche en Économie et Statistique)

  • Hélène Rey

    (Department of Economics)

  • Nicolas Coeurdacier

    (Département d'économie)

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.

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File URL: http://spire.sciencespo.fr/hdl:/2441/c8dmi8nm4pdjkuc9g704ld0h3/resources/rssnc.pdf
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Paper provided by Sciences Po in its series Sciences Po publications with number info:hdl:2441/c8dmi8nm4pdjkuc9g704ld0h3.

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Date of creation: 2011
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Handle: RePEc:spo:wpmain:info:hdl:2441/c8dmi8nm4pdjkuc9g704ld0h3
Contact details of provider: Web page: http://www.sciencespo.fr/

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  1. Eric Van Wincoop & Cedric Tille, 2007. "International Capital Flows," NBER Working Papers 12856, National Bureau of Economic Research, Inc.
  2. Christopher D. Carroll, 2001. "A Theory of the Consumption Function, with and without Liquidity Constraints," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 23-45, Summer.
  3. Stephanie Schmitt-Grohe & Martin Uribe, 2001. "Solving Dynamic General Equilibrium Models Using a Second-Order Approximation to the Policy Function," Departmental Working Papers 200106, Rutgers University, Department of Economics.
  4. Clarida, Richard H, 1987. "Consumption, Liquidity Constraints and Asset Accumulation in the Presence of Random Income Fluctuations," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(2), pages 339-51, June.
  5. repec:fth:starer:8415 is not listed on IDEAS
  6. Gary Chamberlain & Charles A. Wilson, 2000. "Optimal Intertemporal Consumption Under Uncertainty," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(3), pages 365-395, July.
  7. Stephanie Schmitt-Grohe & Martin Uribe, 2001. "Closing Small Open Economy Models," Departmental Working Papers 200115, Rutgers University, Department of Economics.
  8. Daniel, Betty C., 1997. "Precautionary saving and persistent current account imbalance," Journal of International Economics, Elsevier, vol. 42(1-2), pages 179-193, February.
  9. Michel Juillard & Ondra Kamenik, 2005. "Solving SDGE Models: Approximation About The Stochastic Steady State," Computing in Economics and Finance 2005 106, Society for Computational Economics.
  10. Ghironi, Fabio, 2006. "Macroeconomic interdependence under incomplete markets," Journal of International Economics, Elsevier, vol. 70(2), pages 428-450, December.
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