<p>Usually the term steady state is derived from the <a href="https://en.wikipedia.org/wiki/Solow%E2%80%93Swan_model" rel="nofollow noreferrer">Solow Model</a> and its <a href="https://en.wikipedia.org/wiki/Ramsey%E2%80%93Cass%E2%80%93Koopmans_model" rel="nofollow noreferrer">derivatives</a> that seek to explain long-term economic growth. The steady state is a state in which the growth rate of the economy is constant (but positive!). In the Solow model, the growth rate is more or less a function of the saving rate. An economy might deviate from this because it's either on the path to this steady state or because of temporal fluctuations, where Business Cycle Models kick in. The steady state has hence to be thought of as the initial / or long-term average stat of the economy if around which the business cycle evolves.</p>

CC BY-SA 4.0
2018-11-28T12:30:23.870Z
The "usually" statement can only be true for undergraduates. For graduate macroeconomics or research, steady states are most frequently used outside the context of the Solow Model.
BB King
CC BY-SA 4.0
2018-11-29T05:16:17.303Z
evetyone's answers are good but, in the context of KF, the distinction is that the steady state refers to one of the parameter-estimates in the model converging to an actual level ( a constant level ) and not a rate. But, other than that, I think the term "steady state" in both contexts ( KF an business cycles )  can be thought of as equivalent.
mark leeds
CC BY-SA 4.0
2018-11-28T09:20:48.580Z
2018-11-28T10:10:57.957Z
2018-11-28T10:10:57.957Z
E. Sommer
<p>I am reading a book on business cycle models, and it keep using the word "steady state". It never defined what that actually means.</p>

<p>Obviously it is the idea that some key variables reach constant levels ... but WHAT key variables? It doesn't explain that.</p>

<p>For example, at one point it says "zero inflation steady state". Uhm, sorry, but what? Zero inflation steady state? Of course inflation is zero in steady state ... otherwise price levels would not be constant, hence not in steady state. In fact, if inflation was ever non-zero, we can NOT be in steady state since then price levels must be changing by definition.</p>

<p>So what am I supposed to make of this? What is steady state??</p>

CC BY-SA 4.0
2018-11-28T06:32:40.160Z
Hi: I think the definition  depends on the context. For example, take the kalman filter  which is comprised of a set of updating equations.. But, after a while some of the variables ( the variance of the state in a KF ) should reach some constant value even if you update them over and over. This would be considered a steady state. But, in the case of business cycles and other contexts, the meaning is different. In business cycles, I'm not sure what steady state means. I think it has to do with some kind of equilibrium level of something which is slightly different from the meaning in the KF.
mark leeds
CC BY-SA 4.0
2018-11-29T00:34:23.957Z
Inflation does not always need to be zero at a steady state solution. Consider the Sidrauski model of money demand which has a positive inflation in steady state.
erik
<steady-state>
What does steady state mean?
Damnew
# What does steady state mean?

(Asked by: username_0 on 2018-11-27)

I am reading a book on business cycle models, and it keep using the word "steady state". It never defined what that actually means.

Obviously it is the idea that some key variables reach constant levels ... but WHAT key variables? It doesn't explain that.

For example, at one point it says "zero inflation steady state". Uhm, sorry, but what? Zero inflation steady state? Of course inflation is zero in steady state ... otherwise price levels would not be constant, hence not in steady state. In fact, if inflation was ever non-zero, we can NOT be in steady state since then price levels must be changing by definition.

So what am I supposed to make of this? What is steady state??

**Tags:** steady-state
> **Comments:**
> **username_1**: Hi: I think the definition  depends on the context. For example, take the kalman filter  which is comprised of a set of updating equations.. But, after a while some of the variables ( the variance of the state in a KF ) should reach some constant value even if you update them over and over. This would be considered a steady state. But, in the case of business cycles and other contexts, the meaning is different. In business cycles, I'm not sure what steady state means. I think it has to do with some kind of equilibrium level of something which is slightly different from the meaning in the KF.  
> **username_2**: Inflation does not always need to be zero at a steady state solution. Consider the Sidrauski model of money demand which has a positive inflation in steady state.  

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## 1 answers

### Answer by username_3 on 2018-11-28. Score: 2

Usually the term steady state is derived from the [Solow Model](https://en.wikipedia.org/wiki/Solow%E2%80%93Swan_model) and its [derivatives](https://en.wikipedia.org/wiki/Ramsey%E2%80%93Cass%E2%80%93Koopmans_model) that seek to explain long-term economic growth. The steady state is a state in which the growth rate of the economy is constant (but positive!). In the Solow model, the growth rate is more or less a function of the saving rate. An economy might deviate from this because it's either on the path to this steady state or because of temporal fluctuations, where Business Cycle Models kick in. The steady state has hence to be thought of as the initial / or long-term average stat of the economy if around which the business cycle evolves.

> **Comments:**
> **username_4**: The "usually" statement can only be true for undergraduates. For graduate macroeconomics or research, steady states are most frequently used outside the context of the Solow Model.  
> **username_1**: evetyone's answers are good but, in the context of KF, the distinction is that the steady state refers to one of the parameter-estimates in the model converging to an actual level ( a constant level ) and not a rate. But, other than that, I think the term "steady state" in both contexts ( KF an business cycles )  can be thought of as equivalent.  

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