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Computing the risky steady state of DSGE models

Computing the risky steady state of DSGE models
Computing the risky steady state of DSGE models
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.
0165-1765
566-569
de Groot, O.
0be49c71-aa34-43d6-80b7-89426334ecfc
de Groot, O.
0be49c71-aa34-43d6-80b7-89426334ecfc

de Groot, O. (2013) Computing the risky steady state of DSGE models. Economics Letters, 120, 566-569. (doi:10.1016/j.econlet.2013.06.025).

Record type: Article

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.

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Accepted/In Press date: 18 June 2013
e-pub ahead of print date: 25 June 2013

Identifiers

Local EPrints ID: 503790
URI: http://eprints.soton.ac.uk/id/eprint/503790
DOI: doi:10.1016/j.econlet.2013.06.025
ISSN: 0165-1765
PURE UUID: 2f50942e-b4db-4eeb-9ca7-e7ee84d79a56
ORCID for O. de Groot: ORCID iD orcid.org/0000-0002-6853-1129

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Date deposited: 13 Aug 2025 16:35
Last modified: 22 Aug 2025 02:49

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Author: O. de Groot ORCID iD

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