<ol>
<li><p>The steady state is &quot;symmetric&quot; in the sense that terms of trade with <em>all</em> other countries are equal to <span class="math-container">$1$</span>, with respect to the home country. It would be non-symmetric if for some of them terms of trade were not equal to unity.</p>
</li>
<li><p>Is there anything in the model that <em>precludes</em> this steady state from existing? Usually not. Then it is feasible, i.e. it exists. Whether it is an <em>attractive</em>, <em>stable</em> steady state, is another matter.</p>
</li>
<li><p><span class="math-container">$S$</span> is the ratio of two price levels. Logically then, it is a derivative measure of these two, so the price levels are the underlying forces.</p>
</li>
</ol>

CC BY-SA 4.0
2020-09-21T16:50:19.843Z
2020-09-21T16:50:19.843Z
Alecos Papadopoulos
<p>There is a symmetric steady state when there is absence of the international financial market or when markets are complete. Did you find any other explanation?</p>

CC BY-SA 4.0
2020-04-24T09:47:40.863Z
2020-04-24T09:47:40.863Z
Valeria Jemio
<p>In Chapter 8 (small open economy) of Gali's 2015 version of Monetary Policy, Inflation, and the Business Cycle, he often performs log linearisations around a symmetric steady state like below:</p>

<p><a href="https://i.sstatic.net/N0ywq.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/N0ywq.png" alt="enter image description here"></a></p>

<p>My questions are:
1. What exactly is a symmetric steady state,
2. How do we know that it exists
3. How do we know that <span class="math-container">$P_H = P_F = P$</span> in steady state? (I know from S=1, that I can infer that <span class="math-container">$P_H = P_F$</span>, but I'm confused about whether S=1 is the <strong>cause</strong> for <span class="math-container">$P_H = P_F$</span> or a <strong>consequence</strong> of <span class="math-container">$P_H = P_F$</span>).</p>

<p>Thank you very much for your time in advance!</p>

<macroeconomics><open-economy-macro>
Gali (2015) Chapter 8 Symmetric Steady State
NuancedPaul
# Gali (2015) Chapter 8 Symmetric Steady State

(Asked by: username_0 on 2019-09-15)

In Chapter 8 (small open economy) of Gali's 2015 version of Monetary Policy, Inflation, and the Business Cycle, he often performs log linearisations around a symmetric steady state like below:

[![enter image description here](https://i.sstatic.net/N0ywq.png)](https://i.sstatic.net/N0ywq.png)

My questions are:
1. What exactly is a symmetric steady state,
2. How do we know that it exists
3. How do we know that $P\_H = P\_F = P$ in steady state? (I know from S=1, that I can infer that $P\_H = P\_F$, but I'm confused about whether S=1 is the **cause** for $P\_H = P\_F$ or a **consequence** of $P\_H = P\_F$).

Thank you very much for your time in advance!

**Tags:** macroeconomics, open-economy-macro


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## 2 answers

### Answer by username_1 on 2020-09-21. Score: 2

1. The steady state is "symmetric" in the sense that terms of trade with *all* other countries are equal to $1$, with respect to the home country. It would be non-symmetric if for some of them terms of trade were not equal to unity.
2. Is there anything in the model that *precludes* this steady state from existing? Usually not. Then it is feasible, i.e. it exists. Whether it is an *attractive*, *stable* steady state, is another matter.
3. $S$ is the ratio of two price levels. Logically then, it is a derivative measure of these two, so the price levels are the underlying forces.


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### Answer by username_2 on 2020-04-24. Score: 0

There is a symmetric steady state when there is absence of the international financial market or when markets are complete. Did you find any other explanation?


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