Log-Linearization of Stochastic Economic Models

John Stachurski ()

No 564, KIER Working Papers from Kyoto University, Institute of Economic Research

Abstract: This short note studies formally the common practice of log-linearizing stochastic economic models. We make precise the conditions under which stability of the original model can be inferred from that of the linearized model. A transformation to recover the stochastic equilibrium of the former from that of the latter is provided.

Keywords: Log-linearization; Markov process; topological conjugacy. (search for similar items in EconPapers)
Pages: 9 pages
Date: 2003-01
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Persistent link: https://EconPapers.repec.org/RePEc:kyo:wpaper:564

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