Computing the risky steady state of DSGE models

Oliver de Groot*

*Corresponding author for this work

    Research output: Contribution to journalArticlepeer-review

    7 Citations (Scopus)

    Abstract

    This note describes a simple procedure for solving the risky steady state in medium-scale macroeconomic models. This is the "point where agents choose to stay at a given date if they expect future risk and if the realization of shocks is 0 at this date" [Coeurdacier, N., Rey, H., Winant, P., 2011. The risky steady state. The American Economic Review 101 (3), 398-401]. This new procedure is a direct method which makes use of a second-order approximation of the macroeconomic model around its deterministic steady state, thus avoiding the need to employ an iterative algorithm to solve a fixed-point problem. Published by Elsevier B.V.

    Original languageEnglish
    Pages (from-to)566-569
    Number of pages4
    JournalEconomics Letters
    Volume120
    Issue number3
    DOIs
    Publication statusPublished - Sept 2013

    Keywords

    • Risky steady state
    • DSGE models
    • Computation
    • ASSET PRICING-MODELS

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