Log-linearization of stochastic economic models†

  title={Log-linearization of stochastic economic models†},
  author={John Stachurski},
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.