... for limited asset market participation is crucial for obtaining reasonable values of the elasticity ofintertemporalsubstitution, it is too early to precisely determine the extent to which it helps
resolve ...substitution cross-sectionally, using a time series of cross-sections of C ...
M Yogo - Review of Economics and Statistics, 2004 - MIT Press
... THE elasticityofintertemporalsubstitution (EIS) in consumption is a parameter of central
importance in macroeconomics ... rates to the current level of aggregate demand in the intertemporal
IS relation ... implications for the relative mag- nitudes of income and substitution effects in ...
S Basu… - manuscript, University of Michigan, 2002 - cepr.org
... income and substitution effects on labor supply cancel, so that a permanent increase in the real ...
across time, (B) empiricalestimates of the elasticityofintertemporalsubstitution have repeatedly ...
averaged rational expectations error et + θet-i. C is consumption, r is the real interest...
... 1996] INTERTEMPORALELASTICITYOFSUBSTITUTION... Consequently, any mis-measurement
of the actual cost of housing could greatly impair any evidence of short-run intertemporal substitution, and therefore ? ...Consumption Instruments Lags 0 (se) A (se) IES (se) OID test ...
F Guvenen - Journal of Monetary Economics, 2006 - Elsevier
... to 1, reflecting the view that a high degree of intertemporalsubstitution is more ... In an influential
paper Hall (1988) has argued that consumption growth is ... of heterogeneity: limited participation
in the stock market and heterogeneity in the elasticityofintertemporalsubstitution. ...
... investments. Using the after-tax rate of return to capital, Mulligan estimates a
very large elasticityofintertemporalsubstitution of over 2. ... on both consumption
and interest rates and bias the estimates in this context. 2 ...
M Ogaki… - Journal of Political Economy, 1998 - JSTOR
... In estimating the intertemporalelasticityofsubstitution, Hall finds that, when one takes account
of time ... As Hall (1988) points out, intertemporalsubstitution by consumers is a central element
of ... We assume that the constant elasticity of substitution (CES) utility function represents ...
... It also means that forward-looking consumers do not adjust their consump- tion growth in response
to interest rates, so their intertemporalelasticityofsubstitution in consumption must be close to
zero. Hall (1988) also argues that the elasticity of substitution of permanent ...
NR Kocherlakota - Journal of Finance, 1990 - JSTOR
... 1) the quantity (1 -y) is both the reciprocal of the elasticityofintertemporalsubstitution (EIS) and ...
In other words, the individual has the CES utility function, with elasticity of substitution... Singleton's
(1983) maximum-likelihood estimate of y is a measure of intertemporal preferences. ...
A Giovannini - Journal of Development Economics, 1985 - Elsevier
... In the cases where the estimate of the elasticityofintertemporalsubstitution is significant, the ...
are reported in table 8. The estimate of intertemporalsubstitution in consumption is ... from Keynesian equations with estimates of the intertemporalelasticityofsubstitution in consumption...
... first covariance is with consumption growth divided by the intertemporalelasticityofsubstitution;
this gets a ... coeffi- cient of relative risk aversion 7. The elasticityofintertemporalsubstitution с does ...
iid returns there is no interesting role for intertemporalsubstitution in consumption. ...
... of consumption, implying that wealthier families find it easier to substituteconsumption across
periods ... Finally, note that the value of the elasticityofintertemporalsubstitution can vary with family ...
financial instrument that has the same lending and borrowing nominal interest rate «t ...
...estimates of key behavioral parameters (including the elasticity ofintertempora] substitution) and
no rejections of theoretical restrictions. ... where ê is individual consumption, r is the real interest
rate, a is the elasticityofintertemporalsubstitution and q is a residual uncorrelated ...
NY Naik… - The Review of Economics and Statistics, 1996 - JSTOR
... Our results permit direct estimation of the elasticityofintertemporalsubstitution in consumption
and its ... of values as Constantinides (1990), and calculate the intertem- poral elasticity of substitution. ...
of y, a, and b, we then calculate the intertemporalelasticityofsubstitution and its ...
... Hence, the estimator of the intertemporalelasticityofsubstitution which is based only on the growth
rate ... We assume that the Constant Elasticity of Substitution (CES) utility function represents
intra-temporal ... good, P 2 (t), is equated with the marginal rate of substitution based on ...
... In equation (2) the parameter cr denotes the intertemporalelasticityofsubstitution. ... the developing
countries, and Hall (1988) for the United States-the inter- temporalelasticity of substitution... of our
finding of a statistically significant de- gree of intertemporalsubstitution relates to ...
M Obstfeld - European Economic Review, 1994 - Elsevier
... when the coefficient of relative risk aversion and the elasticityofintertemporalsubstitution are
not ... 1992, Alternative specifications for consumption and the estimation of the intertemporal elasticityofsubstitution. ... Epstein, LG and SE Zin, 1989, Substitution, risk aversion, and the ...
D Domeij… - Review of Economic Dynamics, 2006 - Elsevier
... similarmethods can lead to a downward bias in estimates of the intertemporalelasticityof substitution(IES ...equation, even ifestimated on leisure, is not related to the intertemporal
labor-supply ... 22Other studies using the PSID to estimate the labor-supply elasticity include ...
T Bayoumi - The Review of Economics and Statistics, 1993 - JSTOR
... the fall in the liquidity constraints due to deregulation (8) and the intertemporalelasticityof substitution (o-) were ... The in- tertemporal elasticity of consumption with respect to real interest
rates is ... "IntertemporalSubstitution in Consumption," Jour- nal of Political Economy 96 (Apr. ...
JH Hahm - Journal of Economic Dynamics and Control, 1998 - Elsevier
... The magnitude of the intertemporalelasticityofsubstitution ranges from 0.2357 to 0.4144 with
the average ... 1988) found low and insignifi cant estimates for the elasticityofintertemporal substitution for nondurable ... 0.3869 r,+1 + ,+1. (0.1227) Note that the elasticity measure rises ...
... with (17) is shown, in Appendix B.2 D, to be: Et[Rijt+i RMJ+1 } = £<{Д,<+1 ñM,í+i'? } (18) As equation (18) shows, with a unit elasticityofintertemporalsubstitution and conditionally ... The
marginal rate of substitution between current and future consumption reduces to [see ...
... y(Ct, Ht)'vL(Lt) (1 — a)(C,Ht)v(L) II) = W• (0.8) Equation (0.6) is the intertemporal efficiency
condition relating the marginal ...consumption aggregate y; (denotes the elasticity of substitution
between market consumption and consumption of goods produced at home; ...
M Piazzesi, M Schneider… - Journal of Financial Economics, 2007 - Elsevier
... Preferences over aggregate consumption take the standard form (1) View the MathML source where
View the MathML source and σ is the intertemporalelasticityofsubstitution. For low values of σ,
agents are unwilling to substitute aggregate consumption over time. ...
... preference parameters, the constant intertemporalelasticityofsubstitution σ. ... tells us less about intertemporalsubstitution when the risk free return is driven by “taste” shocks. ... occurs because
taste changes have opposing wealth and substitution effects on consumption growth. ...
N Rossi - Staff Papers-International Monetary Fund, 1988 - JSTOR
... problems associated with aggregate savings equations, estimates the elasticityofintertemporal substitution in (private ... seriously to bias downward the estimates of the intertemporalelasticity
of substi ... where the use of IDA resources is common), intertemporalsubstitution is weak ...
R Blundell, M Browning… - The Review of …, 1994 - restud.oxfordjournals.org
... Given our concavity assumption the intertemporalelasticity should be negative for all values
of Ct. ... cycle" variables may make it difficult to pick up high frequency intertemporalsubstitution
effects. ... the real interest rate jumps, becoming positive and higher than consumption growth ...
Y Fauvel… - Canadian Journal of Economics, 1991 - JSTOR
... They imply that the elasticityofintertemporalsubstitution for this category of goods cannot be
ade- quately determined ... It is a controversy whether the intertemporalelasticityofsubstitution
is large enough to make changes in expected rates of return ...Intertemporalsubstitution 203 ...
... all, the first order conditions one uses to characterize the inter-temporal allocation of ... possible
and this means that changes in consumption due to intertemporalsubstitution and variation ... Notice
that to be able to estimate the elasticityofintertemporalsubstitution with a log- linear ...
AO Abdulkadri… - Agricultural Finance Review, 2000 - emeraldinsight.com
... The difference in the estimates for the intertemporalelasticityofsubstitution and the coefficient
of relative risk aversion for the three groups of farm households in this ... Campbell, JY "Intertemporal
Asset Pricing Without Consumption Data." Amer. ... "Elasticities of Substitution in Real ...
...substitution, and ρ as the rate of time preference. ... cycle? ConsumptionEulerequations may help
produce an estimate of the supply elasticity of capital ... 21(2), July 1983: 129-58. Hall, Robert E.
“IntertemporalSubstitution in Consumption.” Journal of Political Economy. 96(2), ...
...Eulerequation (3) under the assumption of CRRA (or iso-elastic) preferences to ... exhibit Constant
Relative Risk Aversion, and maintaining the assumption of inter-temporal separability, the ... If intertemporal prices were the same across individuals and the utility function depended ...
... covariance is with consumption growth divided by the intertemporalelasticityofsubstitution; this
gets ... The simplest approach is to assume that the elasticityofintertemporalsubstitution a = 1 ...
encountered numerical difficulties in estimating the restricted intertemporal aaaet pricing ...
P Cashin… - Review of International Economics, 2003 - Wiley Online Library
... of terms-of-trade shocks, a country may wish to smooth consumption intertemporally in ... a small
open economy, an adverse terms-of-trade shock has substitution effects ... for the United States
is very similar to the assumed intertemporalelasticityofsubstitution between importables ...
R Carrasco, JM Labeaga… - The Economic …, 2005 - Wiley Online Library
... constraints do not bind, it is still possible to analyse intertemporalsubstitution effects using ... price
elasticities have been also computed, as well as the intertemporalelasticityofsubstitution and
a ... In this case, we cannot reject the null hypothesis of intertemporal separability: the ...
CJ Neely, A Roy… - Journal of Business and Economic Statistics, 2001 - ASA
... on an asset return, leads to much more stable, small, sensible estimates of the intertemporal elasticityofsubstitution. ... Neely, Roy, and Whiteman: Risk Aversion Versus Intertemporal Substitution... return than it is an equation for determining an asset return from consumption growth ...
... Pt Pt 1 (ãÀ1)(1Àa) 4 5 X (3) In this condition ã 1aó is the intertemporalelasticityofsubstitution. ...
Our tests consider a range of values for the intertemporalelasticity, but we focus attention on
the case in which we estimate the elasticity in the context of our model. ...
... We allow for cross- country variation in both the intratemporal elasticity of substitution between
traded and nontraded goods and the intertemporalelasticityofsubstitution. ... an infinitely-lived
representative household whose objective is to choose a consumption stream that ...
T Jappelli… - European Economic Review, 2000 - Elsevier
... i,t+1 is the real after-tax rate of interest, ρ −1 the intertemporalelasticityofsubstitution, δ the ... a
linearized Eulerequation can bias the coefficient of the intertemporal rate of substitution. ... once
the assumption of certainty equivalence is dropped by the theory of intertemporal choices ...
... he faced a higher interest rate. The consumer will substitute away from current consumption
because it is, in effect, more expensive. A1tFX)ugh an ... 18 Page 21. consideration of the entire intertemporal planning problem of the consumer and does not decompose in a simple way. ...
MB Canzoneri, RE Cumby… - Journal of Monetary Economics, 2007 - Elsevier
... In a full, general equilibrium model, Jermann (1998) shows that introducing an elastic supply
of capital can reduce interest rate variability, but would ... Assuming that habit is external greatly
simplifies the representative agent's intertemporal marginal rate of substitution. ...
JC Fuhrer… - Journal of Monetary Economics, 2004 - Elsevier
... appropriate functional form for the underlying utility function, the parameter σ can then be
interpreted as the intertemporalelasticityofsubstitution. ...equation (1) assumes that the 1-quarter interest rate affects the economy by inducing intertemporalsubstitution in consumption. ...
RA Amano… - Review of Economics and Statistics, 1997 - MIT Press
... a significant degree of substitution between government and private consumption is sensitive
to ... 1/ can be interpreted as estimates of the intertemporal elasticities of substitution. ... concluding,
it is worthwhile to compare the intertemporalelasticityofsubstitutionestimates ob- tained ...
EF Koenig - The Quarterly Journal of Economics, 1990 - qje.oxfordjournals.org
... In Section IV the Eulerequations for interest-bearing assets and money are estimated jointly. ... Substitute from (2) into equation (1') to obtain ... In subsection AI examine whether or not, apart from
the influence of the real rate of interest, consumption follows a random walk. ...
F Guvenen - Unpublished manuscript, University of Rochester, 2001 - Citeseer
... of the problem: First we ask, do we really know the value of the intertemporalsubstitution? ... (1)
where ∆C is the change in log consumption between two consecutive periods, Rf is the ... rate, η
is the time preference rate, and ρ is the elasticityofintertemporalsubstitution parameter. ...
M Iacoviello - Journal of Housing Economics, 2004 - Elsevier
... formed at date 0, 10 β is the discount factor, σ is the intertemporalelasticityofsubstitution, and
j ... structure of the economy, since it is derived only from a simple intertemporal optimization problem ...
of the unconstrained agents, and θ, which is related to the price elasticity of housing ...
J Muellbauer - Annales d'Economie et de Statistique, 1988 - JSTOR
... Then the marginal rates of substitution of goods in period t are independent of consumption
patterns in earlier ... Habits are a par ticular kind of breach of this intertemporal separability and
have been in widespread use since FARRELL [1952] to justify dynamic effects in demand ...
G Bufman… - Journal of Money, Credit and Banking, 1993 - JSTOR
... In that case, t is the subjective discount factor; p is a parameter that reflects inter- temporal substitution, in that 1/(1-p) is the elasticityofintertemporalsubstitution of broadly defined ... The
estimated values of the intertemporalelasticityofsubstitution range from 0.39 to 0.83 . ...
AEH Speight, MJ White - Applied Economics, 1995 - Taylor & Francis
... on the Eulerequation for rational optimizing consumers which suggest a near-zero elasticity ofintertemporalsubstitution in con ... reporting estimates of the proportion of con- sumption
constrained by liquidity constraints, the elasticity of intertemporal substituion, substitution...
H Bohn - Journal of Money, Credit and Banking, 1991 - JSTOR
... separable utility a risk-aversion parameter 8 > 1 is equivalent o an elasticityofintertemporal substitution below one ... In case of low intertemporalsubstitution (8 > 1), consumers respond to
a high price of money ... in Example 2). Since 0 < g( ) < 1 for 0 < (X < 1, the elasticity in (18) is ...
... are given in table 2. Besides the estimates of the elasticityofintertemporalsubstitution 1 a ... is 0.88
and 1.05 respectively, points to a higher degree of intertemporalsubstitution in the ... for direct
comparison, it is of interest to estimate the intertemporalelasticityofsubstitution from the ...
, … Reserve Bank of Minneapolis. Institute for Empirical … - 1992 - mpls.frb.org
... 3. Estimates of the IntertemporalElasticityofSubstitution using Aggregate US Data ... the actual
cost of housing could greatly impair any evidence of short run intertemporalsubstitution, and
therefore ... the one hand, if the failure of the standard Eulerequations for consumption is due ...
S Hamori - Applied Economics Letters, 1996 - Taylor & Francis
... the intertemporalelasticityofsubstitution, the smaller the consumption growth rate for a given interest rate. ... for the relevant income bracket were used as instrumental variables, ie the growth
rate of consumption in the ... The intertemporalelasticityofsubstitution has a positive value ...
A Atkeson, M Ogaki - Journal of Monetary Economics, 1996 - Elsevier
... Economics 38 (1996) 50534 527 5. Measuring intertemporal elasticities of substitution In this ...
precise measurement of any individual's intertemporalelasticityofsubstitution of consumption
expen diture ... l, 2, 71, and 72, the ratio of the intertemporalelasticityofsubstitution for any ...
CE Weber - Journal of Business & Economic Statistics, 2000 - JSTOR
... aversion does not equal the re- ciprocal of its intertemporalelasticityofsubstitution, then models ...
This implies that, even if an allowance for intertemporalsubstitution is appropriate [ie ... First, I estimate A directly from the consumptionEulerequation for the representative permanent ...
... Consider the intertemporalelasticityofsubstitution (IES). ... We estimate, quite precisely, intertemporalelasticity parameter values that are on the higher end of those ... on the size of change
in consumption can help us to identify the taste for intertemporalsubstitution. ...
G De Bondt - BIS Working Paper No. 69, 1999 - papers.ssrn.com
... directly on the magnitude of the intertemporalelasticityofsubstitution (σ > 0). If the real interest...
is constant or the intertemporalsubstitutionelasticity is zero, then equation (6) shows that ... the
underlying consumption model applies to variables measured at points in time, whereas ...
WE Ferson, JJ Merrick - Journal of Financial Economics, 1987 - Elsevier
... eg, Pratt (1964)] or as the inverse of the intertemporalelasticityofsubstitution [eg, Hall ... Eichenbaum,
M. and L. Hansen, 1985, Estimating models with intertemporalsubstitution using aggregate time ...
Flavin, M., 1984, Excess sensitivity of consumption to current income: Liquidity ...
R Barrell… - DISCUSSION PAPERS-NATIONAL INSTITUTE OF …, 2004 - niesr.ac.uk
... coefficient on RRt-1 could be interpreted as the inverse of the intertemporalelasticityofsubstitution. ...
Boone et al (2001), who impose long-run unit elasticity between consumption... is consistent with
an effect of financial liberalisation on intertemporalsubstitution, which emerges ...
M Yogo - The Journal of Finance, 2006 - Wiley Online Library
... is Epstein and Zin's (1991) recursive function, which allows for the separation of the elasticity ofintertemporalsubstitution (EIS) from ... Define the intertemporal marginal rate of substitution (IMRS)
as. ... Ogaki and Reinhart (1998, Table 2) estimate a higher elasticity of ρ= 1.167 with a ...
... Taking the natural logarithm of (7) and using equation (2) to substitute for j yields: ... assumed a
constant real interest rate, but the relationship between the real interest rate and consumption
growth should be closely related to the intertemporalelasticityofsubstitution. 17 ...
R Blundell, C Meghir… - Journal of Econometrics, 1993 - Elsevier
... Indeed, Blundell, Browning, and Meghir (1992) estimate the intertemporalelasticityofsubstitution
for consumption... The parameter p, influences the elasticityofintertemporalsubstitution. ... extensive
evidence on the size of the intertemporalsubstitutionelasticity for consumption...
Z Hu - IMF Working Paper No. 93/26, 1993 - papers.ssrn.com
... in my working paper (Summers 1982) values of the intertemporalelasticityofsubstitution which
cluster ... time preference, a reveals risk aversion, while a is the elasticityofintertemporalsubstitution. ...
Since both risk aversion and intertemporalsubstitution parameters play a role in ...
R Blundell, M Browning, C Meghir… - 1989 - economics.mcmaster.ca
... Given that the estimated elasticityofintertemporalsubstitution is often used as a basis for ...
parameters that enter both the lntra-tetnporal and inter-temporal allocation decisions ... We
concentrate attention on the intertemporalsubstitutionelasticity; that is, the percentage change ...
M Fuse - Applied Economics Letters, 2004 - ingentaconnect.com
... REFERENCES Hall, RE (1988) Intertemporalsubstitution in consumption, Journal of Political
Economy, 96, 339–57. Hamori, S. (1996) Consumption growth and the intertemporalelasticity ofsubstitution: some evidence from income quintile groups in Japan, Applied ...
S Ludvigson… - Review of Economics and Statistics, 2001 - MIT Press
... motive, the degree of prudence and risk aversion, and the willingness of consumers to substitute consumption over time. ... We start with a standard intertemporal optimization problem, in which
a finite-lived consumer with isoelastic ... or, in the specific case of isoelastic-elastic utility: ...
C Favero - CEPR Discussion Paper No. 5110, 2005 - papers.ssrn.com
... for expected consumption growth allows the estimation of the intertemporalelasticityofsubstitution
and provides ... Such a relation is determined by the elasticityofintertemporalsubstitution. ... function
delivers a precise estimate of the coefficient of intertemporalsubstitution and a ...
... liquidity constraints there should be a negative correlation between the marginal rate of substitution and A1+w1 or any variable that reduces the ... This a- is called the elasticityof intertemporalsubstitution. ... Since the consumption innovation e2 and E2 is uncorrelated with ...
CE Weber - Journal of Monetary Economics, 2002 - Elsevier
... function which separates the coefficient of relative risk aversion from the intertemporalelasticity ofsubstitution. ... function which is an isoelastic function of a constant elasticity of substitution... consumption (11) The isoelastic-distributed lag version of intertemporal non-separability in ...
R Bansal… - The Journal of Finance, 2004 - Wiley Online Library
... Zin (1989) preferences, which allow for a separation between the intertemporalelasticityof substitution (IES) and ... is determined by the magnitudes of the risk aversion and the elasticity of substitution. ... ψ, is greater than 1. In this case the intertemporalsubstitution effect dominates ...
JE Boscá, A Cutanda… - Applied Economics, 2004 - Taylor & Francis
... extended by estimating the parameter related to the elasticityofintertemporalsubstitution that
was ... The intertemporal marginal rate of substitution for a representative consumer with ... two output
elasticities and of the coefficient related to the intertemporalelasticityofsubstitution. ...
CI Lee - Review of Economics and Statistics, 2001 - MIT Press
... where ct is consumption at time t, ht is the hours of work ... Given that the theory of inter- temporal substitution requires a positive figure for the ... TABLE 1.—ESTIMATED INTERTEMPORAL ELASTICITYOFSUBSTITUTION OF LABOR SUPPLY 1967–1976 BALANCED SAMPLE (N ...
J Banks, R Blundell… - European Economic Review, 1994 - Elsevier
... as column (3) in table 1, ie the base period reference elasticityofintertemporalsubstitution is
.68 ... to look outside simple current period models and acknowledge the intertemporal factors that ...
The main reason why households do not substitute expenditures over time may well not ...
T Bayoumi… - IMF Working Paper No. 89/88, 1989 - papers.ssrn.com
... These results agree with Hall (1988), who finds that the intertemporalelasticityofsubstitution
is low using data for the United ... with labor supply and hence that the correlation of income and consumption is due to substitution between leisure and consumption, would be ...
RA Amano… - Journal of International Economics, 1996 - Elsevier
... of utility, 1 la may be interpreted as the longrun intertemporalelasticityofsubstitution (IES) for ...
these IES estimates (including our own) imply that the income elasticity for domestic ... a significant
and positive IES for import consumption suggests that intertemporalsubstitution is an ...
... 16 There are also non-stochastic Eulerequations. This paper does not examine those equations. ... Q U(C) = >Uq(Cj) (12) q 1 Uq(Cfl q=1,...,Q (13) In (13), 'lq is the intertemporal elasticityofsubstitution in consumption of the qth consumption service. ...
D Croix… - Journal of Applied Econometrics, 1998 - arno.unimaas.nl
... approximations to the true effects, even with rational expectations and in the absence of consumption insurance ... Constantinides (1990) shows that there is a gap between the relative
risk aversion and the intertemporalelasticityofsubstitution. ...INTERTEMPORALSUBSTITUTION...
E Girardin, L Sarno… - Empirical Economics, 2000 - Springer
... the assumption of a constant real interest rate or a zero intertemporalelasticityofsubstitution,
measured con ... lagged instrument set are reported in Table 4. The intertemporalelasticity of
substition ... Nevertheless, the intertemporal elas- ticity of substitution, s, is found insigni®cantly ...
R Garcia, A Lusardi… - Journal of Money, Credit, and Banking, 1997 - JSTOR
... Third, (1) assumes separability between consumption and leisure. ... micro data have abundant
information on consumers, the time period is rarely long enough to allow sufficient variations
in the interest rate for an accurate estimate of the intertemporalelasticityofsubstitution. ...
G Berloffa - The Economic Journal, 1997 - Wiley Online Library
... the wife and the educational level appear to alter the intertemporalelasticityofsubstitution of
the ... where σ is the elasticityofintertemporalsubstitution, r is the real interest rate (r and ... of a second
earner does not change the household's attitude towards intertemporalsubstitution. ...
M Okubo - Institute of Policy and Planned Sciences …, 2002 - infoshako.sk.tsukuba.ac.jp
... of substitution ranges from 2.208 to 2.537. ... 4.2 The IntertemporalElasticityofSubstitution... 12 The
following GMM results appear robust to other combinations of instrumental variables that include
the growth rate of C2t in place of the real consumption ratio. 12 Page 15. ...
FA Villagomez - Applied Economics, 1997 - Taylor & Francis
... the `Euler equa- tion approach' that exploits the implications of inter- temporal optimization and
allows one to estimate the coe cient of intertemporalsubstitution in consumption. ... of interest in Equation 3 are u , which controls the intertemporalelasticityofsubstitution in con ...
G Karras - Journal of Money, Credit and Banking, 1994 - JSTOR
... where p = ba, and ff = -u'lc*u", the elasticityofintertemporalsubstitution, is assumed to be a
constant ... expands, it starts offering more and more services (like school lunches) that substitute
for, rath- er than services (like national defense) that complement private consumption. ...
... of relative risk aversion 7 and not the elasticity of intertempo- ral substitution ф ... 3.6.2 Unit Elasticity ofIntertemporalSubstitution When ф is equal to one, we have shown above that the ... Since data
on consumption are available only from 1890, we use the sample 1890-1993 in our ...
T Jappelli… - The American Economic Review, 1989 - JSTOR
... Comparing the estimates of X with those reported in the literature is of some interest. ... obtained
by Hayashi (1985b) on the basis of the Japanese Survey of Family Consumption (0.15 ... not rejected,
with the exception of the UK Overall, the results of the Eulerequations indicate that ...
... t+1 where σ=1/β, which may be interpreted as the intertemporalelasticityofsubstitution, and
μ ... we assume a constant interest rate, and hence the absence of intertemporalsubstitution, Eq ...
consider the growth rates of consumption and income, the logs of consumption and income ...
CD Carroll, J Overland… - American Economic Review, 2000 - JSTOR
... In- deed, the intertemporalelasticityofsubstitution in consumption is defined as the response
of consumption growth to interest rates. Since the interest rate in this model is A - ., equation
(10) implies that the infinite-horizon intertem- poral elasticity of substitution in this model ...
CD Carroll… - The New Palgrave Dictionary of …, 2008 - works.bepress.com
... to break the usual equation ς = 1/ρ where ς is the elasticityofintertemporalsubstitution and ρ ...
given the basic properties ς > 0 and ρ > 0, a positive wealth elasticity of risk ... in each period, where
the fraction depends on the degree of impatience and intertemporalsubstitution (1/ρ). ...
J Chang, V Errunza, K Hogan… - European Financial …, 2005 - Wiley Online Library
... It can also be shown that measures the elasticity of inter- temporalsubstitution. ... Based on equation
(5), we will follow Campbell (1993) to substituteconsumption out of the pricing ... model with changing
variances.7 One of them is to set the elasticityofintertemporalsubstitution ¼ 1 ...
CB Mulligan - Joint Invited Session in Econometrics and …, 2001 - hubcap.clemson.edu
... Third, capital tax incidence is one of the reasons why it is important to have a good estimate of
the aggregate intertemporalelasticityofsubstitution (IES), and using the capital tax data can
help us directly answer the ... 1991-95 1996- Page 16. Capital, Interest, and Substitution - 13 ...
PO Gourinchas… - Econometrica, 2002 - Wiley Online Library
... We further assume that the felicity function u is of the Constant Relative Risk Aversion (CRRA)
form, with intertemporalelasticityofsubstitution 1/, and multiplicatively separable in Z: ...Consumption
increases (respectively decreases) over time when the interest rate is larger ...
... to be highly accu$ rate for reasonable values of the intertemporalelasticityofsubstitution, provided
that ... coeffi cients of 5, 10, and 15, and elasticities of intertemporalsubstitution of 0.5 ... of stock prices
in relation to dividends, if the elasticityofintertemporalsubstitution is greater ...
T Ho - International Review of Economics & Finance, 2001 - Elsevier
... in productivity raises the real wage sufficiently, that there is a substitution away from ... β(1+r)] σ
C t *, where σ=−U′C*/{C*U (C*)} is the intertemporalelasticityofsubstitution. ... that the robustness
of the relationship between government spending and private consumption will be ...
CC Nieh… - The Quarterly Review of Economics and Finance, 2006 - Elsevier
... Second, this equation also allows us to estimate the inter-temporalelasticity of substitution
simultaneously; that is, 1 ... testable implications for (7), (a) If 1/α > ν/α, then C t and G t are
Edgeworth-Pareto complements, under which, the intertemporalelasticityofsubstitution is larger ...
S Imai… - International Economic Review, 2004 - Wiley Online Library
... none of the parameters can be straightforwardly interpreted as describing the intertemporal elasticityofsubstitution in labor ... the wage (R s K t ) times the marginal utility of consumption, which
is ... As the wage increases over the life cycle, the substitution effect induces labor supply ...
A Cutanda Tarín - Spanish Economic Review, 2003 - Springer
... Key words: Intertemporalsubstitution on consumption, permanent income, bor- rowing constraints ...
of relative risk aversion (ie, the inverse of the elasticityofintertemporalsubstitution). ... to accurately estimate the parameter associated to the intertemporalelasticityofsubstitution. ...
SI Nishiyama - Journal of Applied Econometrics, 2005 - Wiley Online Library
... analysis in the context of LCPIM to estimate the intertemporalelasticityofsubstitution (IES) for ...
denoted MRS hereafter) or intertemporal marginal rate of substitution (denoted IMRS ... variables,
the log-linearized cross-Eulerequation specifies the intertemporal optimality condition ...
... presence of precautionary saving 473 Table 1 Estimates of the elasticityofintertemporal substitution, 1 A ... Mankiw, NG, 1985, Consumer durables and the real interest rate, Review of ... Zeldes,
S., 1989, Consumption and liquidity constraints: An empirical investigation, Journal of ...
T Harashima - Economics Working Paper Archive EconWPA, 2005 - abhatoo.net.ma
... t t c c& and the output/capital ratio t t k y are given, the elasticityofintertemporal substitution ρ can be estimated ... estimated without information on interest rates or returns
on assets. It implies that an ...consumption is │ ⌋ ⌉ │ ⌊ θn k A ψχρ c c ...
... coefficient of risk aversion, θ = 1−γ 1− 1 ψ , and ψ is the elasticityofintertemporalsubstitution
(IES). ... (4) where mt+1 is the log of the intertemporal marginal rate of substitution (IMRS), and
rj,t+1 ... is larger than one, the substitution effect dominates the wealth effect. ...
JA Parker - The American Economic Review, 1999 - JSTOR
... 3 is the discount factor; and Rt is the gross after-tax real interest rate between ... wheret+ l-ln(ct+
1) - Et[ln(ct+ )] and a is the intertemporalelasticityofsubstitution.6 If expectations ...equation (3)
is serially correlated within households due to time aver- aging of consumption over three ...
VL Chan… - Applied Economics, 1997 - Taylor & Francis
... where ct = log Ct , s = 1/a represents the intertemporal elas- ticity of substitution and is ... Tables
3(a) and 3(b) present the regression results for non-durable consumption, where r is taken to
be the bank interest rate (rbt) in Table 3(a) and the private interest rate (rpt) in Table 3 ...
PJ Montiel - The World Bank Economic Review, 1994 - World Bank
... This is likely to increase the elasticity of base money demand, implying that the infla- tionary
consequences of a ... For domestic residents, the Eulerequation for optimal intertemporal con-
sumption plans is ... and the equality of the expected marginal rates of substitution becomes ...
N Rossi - Staff Papers-International Monetary Fund, 1989 - JSTOR
... rates and the growth rate of consumption provides information on the intertemporalelasticity ofsubstitution. ... other things being equal, on the real interest rate elasticity of consumption. ... the
findings here with the estimates of the degree of intertemporalsubstitution provided in ...
V Esteve… - Applied Economics, 2005 - Taylor & Francis
... residuals and endogeneity bias arising from innovations in the relative price to innovations in consumption. ... These parameter estimates imply that the value of the intratemporal elasticity of substitution, , is 0.46 ... GMM estimation: the intertemporalelasticityofsubstitution parameter. ...
...interest is consistently too high, about 4%, as opposed to the observed 1% in US data. ... The
individual household's marginal rate of substitution is calculated by raising the individual
household's consumption growth to a power equal to the negative of the RRA coefficient. ...
OP Attanasio… - Review of Economics and Statistics, 2001 - MIT Press
...equation is ln ci,t 1 ln ci,t (r ), where is the intertem- poral rate of substitution. ... where is the elasticity ofintertemporalsubstitution, ˜i,t 1 is an expectational error, and ˜ i,t 1 is the ... 4 For instance, if the interest rate is constant and consumption growth is normally distributed, this term ...
TS Wirjanto - Applied Economics, 1996 - Taylor & Francis
... Therefore, the estimating equa- tions involve ratios of forcing variables (except the real interest
rate which is in levels ... This model has four free parameters: the fraction of current-income consumption (u ), the intertemporalelasticityofsubstitution (IES) in consumption (s ), the ...
... i,t), AB = (δL+1, δL+2, . . ., δK)/, and σ denotes the (constant) intertemporalelasticityofsubstitution. ... substitution due to variations in preferences (AlnCδ t+1); intertemporalsubstitution in response
to ... ment in average consumption, which we call misspecification and denote AlnCθ ...
MP Taylor - Oxford Review of Economic Policy, 1999 - Oxford Univ Press
... to the subjective rate of time preference, or an intertemporalelasticityofsubstitution of zero ... and
the real interest rate, representing the pure substitution effect discussed ... plausible assumptions
they show that the estimate of the elasticityofintertemporalsubstitution is downward ...
... p5) represents the true price index for group s. For example, in the intertemporal allocation
problem ... of the level of y8, guaranteeing a unitary income or expenditure elasticity (O ln ... least
because the second order price derivatives give the constant utility 'Slutsky' substitution effects ...
... ôU'(Ck,t+i)IU'(Ct) is the intertemporal marginal rate of substitution of the ... but breaks the tight link
between the coefficient of relative risk aversion and the elasticityofintertemporalsubstitution. ...
returns when consumption is low, that is, when the marginal utility of consumption is high ...
L Pistaferri - Journal of Labor Economics, 2003 - stanford.edu
... Lucas and Rapping (1969) suggested that a large intertemporalsubstitution in labor supply could
potentially ... to obtain Frisch (or l-constant) demand functions; in this context, consumption and
hours of ... The parameter h is the intertemporalelasticityofsubstitution for labor supply. ...
DJ Evans - Fiscal studies, 2005 - Wiley Online Library
... (a) Lifetime consumption behaviour The interpretation of e as the reciprocal of the intertemporal elasticityofsubstitution in consumption... are imposed on the utility function – does not apply in
this intertemporal context. ... Furthermore, if utility functions are typically iso-elastic, then ...
... A more realistic utility function would exhibit a constant elasticity of intertem- poral substitution. ...
The agent has preferences characterised by a constant elasticityofintertemporalsubstitution
equal to 1 ... likely to affect the estimate of because of measurement error in consumption. ...
GA Hardouvelis, D Kim… - Journal of Empirical Finance, 1996 - Elsevier
... 1 0) + 0 o" = y, while the elasticity of 3 When the elasticityofintertemporalsubstitution, or, equals
1 ... Journal of Empirical Finance 3 (1996) 267301 271 intertemporalsubstitution, o, is the ratio of
one ... by the coefficient on the consumption factor, 0 o. If reliable consumption data exist ...
AS Blinder, A Deaton, RE Hall… - Brookings Papers on …, 1985 - JSTOR
... time discount rate, and uses the observed growth rate to estimate the intertemporalelasticity ofsubstitution. ... 233-45; and Gerald Carlino, "Interest Rate Effects and Intertemporal Con- sumption ...
after-tax real interest rate made inferences about the interestelasticity of consumption...
J Banks, R Blundell… - The measurement of Household …, 1994 - books.google.com
... period for households at points along different paths that are consistent with inter- temporal
reallocation of ... Period by period needs outweigh intertemporalsubstitution. ... 3) in table 8.1, which
is to say using a base-period reference elasticityofintertemporalsubstitution of-0.68. ...
O Attanasio… - Investigaciones Económicas, 1994 - funep.es
... In this case the elasticityofintertemporalsubstitution is not constant. 5 See, for instance,
Hall (1988). ... The problem becomes even more serious if the elasticity of substitution is
not constant but a function of various demographic variables. ...
TW Ho - Japanese economic review, 2004 - Wiley Online Library
... function 1/α and 1/ν are interpreted as, respectively, the intertemporalelasticityofsubstitution
for private ... The estimate ν/α is defined as the intratemporal substitution of elasticity between private ...
α and ν are 0.942 and 0.811, respectively, implying that intertemporal elasticities of ...
S Alan… - Review of Economic Studies, 2010 - Wiley Online Library
... between periods t and t + 1. In this framework, the elasticityofintertemporalsubstitution (eis)
is ... we propose an alternative approach to estimating the parameters of intertemporal allocation. ...
Assuming exponential discounting and an iso-elastic felicity function, this gives the Euler...
R Colacito… - 2005 Meeting Papers, 2005 - papers.ssrn.com
...substitution (IMRS) with respect to each good are equalized and therefore perfectly ... is held by
a small fraction of the population with a high elasticityofintertemporalsubstitution. Attanasio
and Weber (1989) documents an intertemporalelasticityofsubstitution in excess of one in ...
... that, even for relatively small deviations from unit elasticity of substitution between labour ... one
gets using aggregate consumption data to estimate the elasticityofintertemporalsubstitution
is less ... in this table were obtained using the arithmetic mean as aggregate consumption. ...
HP Van Dalen - Journal of Macroeconomics, 1995 - Elsevier
... present estimates of individual value of public consumption and the intertemporalsubstitution elasticity by means of ... the aggregate consumption bundle, and l or is the elasticityofintertemporal substitution in aggregate ... "The IntertemporalElasticityofSubstitution in Consumption...
A Noda… - Economics Bulletin, 2010 - accessecon.com
... Many empirical studies still have an interest in the appropriate value of IES (see, for example,
Oshio and Kobayashi (2009)). ... (1996): “Consumption Growth and the IntertemporalElasticityof Substitution: Some Evidence from Income Quintile Groups in Japan,” Applied ...
... This effect operates in addition to any direct intertemporalsubstitution motive (as determined ... in
the household, whereas one additional child increases consumption growth by ... The intertemporal elasticityofsubstitution σ appears relatively small, taking a value between 0.06 and ...
CE Weber - Economic Inquiry, 1998 - Wiley Online Library
... Thus, in the context of the intertemporal optimizing model developed here, it is possible that once
the current spread and the private real interest rate are included in the model of ... 12. I/( 1 -a) can
be interpreted as a structural inter- temporalelasticity of substitution, since I - a is ...
... The estimated elasticity of substitution is large. ... problem is separable, and can be decomposed
into an atemporal portfolio problem and inter- temporalconsumption smoothing. ... expected changes
to the cost of transactions as well as the usual intertemporalsubstitution effects. ...
TS Wirjanto - Applied Economics, 2004 - Taylor & Francis
... The point estimates of the parameter γ fall in a slightly larger range of [0.693, 0.706] and imply
that estimates of the intertemporalelasticityofsubstitution fall in the ... is determined by the relative
magnitude of the intertemporal and intraperiod elasticities of substitution. ...
WE Ferson, CR Harvey - Journal of Finance, 1992 - JSTOR
...consumption model implies that any real return Rt+1 multiplied by an intertemporal marginal
rate ...equations place inequality restrictions on the mean and variance of the marginal rate of substitution. ... l and M2, t+l are functions of lagged and future consumption expenditures and ...
TS Wirjanto - Canadian Journal of Economics, 1995 - JSTOR
... Empirically, liquidity constraints are found to be important, and the estimated intertemporal elasticityofsubstitution parameter is much larger ... If this group of consumers has a constant elasticity substitution utility function with an IES a, and ... Aggregate consumption behaviour 1145 ...
... restriction fol- lows in the special case of constant real rates of interest and non ... consumers are
liquidity constrained, changes in taxes or transfers will alter the intertemporal be- havior ...equation
re- strictions on the system of equations gen- erating changes in consumption and in ...
MT Kiley - The Review of Economics and Statistics, 2010 - MIT Press
... dimensional objects, the parameter s (the intertemporal elas- ticity of substitution) is set ... and Miles
Kimball, “Long-Run Labor Supply and the ElasticityofIntertemporalSubstitution for Consumption...
is converted to real values by dividing by the personal consumption expen- diture ...
... (1). where σ is the intertemporalelasticityofsubstitution, C is consumption, and ρ is the subjective
rate of ... product of own capital; these may also influence the rates of intertemporalsubstitution
and/or ... of the model in Section 2. The time preference rate and elasticity of substitution...
A Consolo… - Journal of Monetary Economics, 2009 - Elsevier
... a consequence of the lags with which monetary policy normally operates, interest rate rules ...
problem is different on the relevant variables the optimalspecification of the Eulerequation for
estimation is ... therefore it is not instrumented, then a much lower value estimate of monetary ...
M Padula - Centre for Studies in Economics and Finance Working …, 1999 - csef.it
... As shown by Browning [8] in a multi-goods model, the intertemporalelasticityofsubstitution is
defined as ... the full set of parameters, I need also the within-period marginal rate of substitution. ...
of using the durable goods as a collateral make the intertemporal allocation condition ...
... Clearly, this future retirement income acts as a substitute for risk-free asset holdings and induces ...
In this section we solve for the optimal portfolio and consumption rules for some of ... Parameters
of interest are the variance of the temporary and permanent shocks to labor income ...
TS Wirjanto - Canadian Journal of Economics, 1991 - JSTOR
... These findings also indicate that the intertemporalelasticityofsubstitution is very close to
zero.11 The random ... in all other goods will be correlated with the expected changes in consumption
of non ... it can be shown that under the assumption of a constant real interest rate the ...
AW Gregory… - Canadian Journal of Economics, 1991 - JSTOR
... factor, a > 0 is the constant measure of relative risk aversion, and p > 0 is the inverse of the elasticityofintertemporalsubstitution. ... If a = p, then equation (10) collapses to the standard
expected utility specification with constant elasticity of substitution (CES) preferences. ...
DI Laibson, A Repetto, J Tobacman, RE Hall… - Brookings Papers on …, 1998 - JSTOR
... Intrapersonal games involve much greater analytic complexity than analogous nonstrategic intertemporal maximization, and this ... because they think that future selves will act in the interest
of the ... economic life begins at twenty and do not model consumption decisions before this ...
M Okubo - Journal of Money, Credit and Banking, 2008 - Wiley Online Library
... nondurable and durable goods into a model with homotheticity of preferences yields a more
plausible estimate of the intertemporalelasticityofsubstitution (IES) in ... That is, the elasticity of substitution ε accounts for the role of durable goods in intertemporalsubstitution in that ...
E Skoufias - Journal of Development Economics, 1996 - Elsevier
... In this formulation, the own-wage intertemporalelasticityofsubstitution (IES) for females, for
example ... Although not significant, the positive own-wage elasticityestimates in large- as well ... may
be primarily responsible for the rejection of the intertemporalsubstitution hypothesis for ...
J Banks, R Blundell… - The Review of …, 2001 - restud.oxfordjournals.org
... non-standard case where the link is broken between the elasticity of substitution and individuals ...
where p is the intertemporalelasticity and where the preference parameter <Pt will be allowed ...
the increasing variance of income and the increasing variance of consumption in the ...
DT Slesnick - Journal of Business & Economic Statistics, 1998 - JSTOR
... of income and consump- tion, Hall's (1988) estimate of the intertemporalelasticityofsubstitution
using (1.4 ... a group of individuals who pool their resources to make joint consumption decisions
or ... to measure housing con- sumption instead of the principle, interest, insurance, and ...
...consumption and import demand, and Atkeson and Ogaki (1996) with the intertemporalelasticity ofsubstitution. ...Estimates of the long-run elasticity of substitution between consumption and money ...
The intertemporal optimization problem here differs in several ways from earlier ...
... Section 6 examines the implications for the relative risk aversion and intertemporalelasticityof substitution. Section 7 concludes. 2 Theoretical Framework ...substitute in the identity for observed consumption in terms of true consumption and measurement error as stated above. ...
YL Chyi… - Applied Economics, 1997 - Taylor & Francis
... which measures the intertemporalelasticityofsubstitution in con- sumption. ...Interest rates employed
in this study are obtained from various sources and generally for different financial ... Page 5. The
'rule of thumb' consumption model Table 1. Cross-country evidence, Ac, = p + IAy, ...
S Alan… - Institute of Economics, University of Copenhagen …, 2003 - econ.ku.dk
...Interest usually centres on the inverse of this parameter, the elasticityofintertemporalsubstitution
(EIS ): ... Low values of the EIS indicate an aversion to fluctuating consumption streams.1 For the
iso0elastic case with exponential discounting the only other preference parameter ...
J Agell… - The Scandinavian Journal of Economics, 1996 - JSTOR
... effects from financial liberalisation can account for a large part of observed changes in the intertemporalconsumption pattern of ... presence of a constant real interest rate. ... for the sample period
1952-89, ie, we quite deliberately exclude observations from the consumption bust of ...
CJ Malloy, TJ Moskowitz… - The Journal of …, 2009 - Wiley Online Library
... B. EulerEquations for an ElasticityofIntertemporalSubstitution ≠ 1. ... H g t is the number of
households in group g in quarter t. We then substitute the average ... on a constant term and the
covariances of log excess returns on the portfolios and discounted consumption growth over ...
JY Campbell… - European Economic Review, 1991 - Elsevier
... 730 JY Ciimphrll timl NG Mankiw, The response of consumption to income intertemporalelasticity ofsubstitution. ... in table 2. In every country except Japan, the forecasts of consumption growth
and ... well-defined linear relationship.21 Table 3 adds the short-term real interest rate to ...
M Flavin… - The American Economic Review, 2008 - JSTOR
... mines both risk aversion and the elasticityofintertemporalsubstitution (EIS ... When the utility function
is generalized to depend on two goods, we can still characterize the household's willingness
to substitute one of the goods (for example, nondurable consumption)across time ...
... their marginal rate of substitution. The equilibrium in a heterogeneous-household, full- ... with equity
returns. Habit persistence lowers the intertemporalelasticityofsubstitution in ... Therefore, given
the risk aversion, habit persistence lowers the elasticity and raises the ...
DL Gleizer - Brazilian Review of Econometrics, 1991 - bibliotecadigital.fgv.br
... savings function approach and then address the issue of intertemporalsubstitution in consumption...
The standard saving function employed in the studies of interestelasticity in the ... external savings
decreases domestic savings and that there is a substitution relationship between ...
... (1989) found positive but small in magnitude intertemporalelasticityofsubstitution. Campbell ...
for housing in the household portfolio is important for the household's intertemporal... assume a
simple constant elasticity of substitution (CES) model of consumer behavior thus ...
M Browning… - Canadian International Labour Network …, 1999 - ciln.mcmaster.ca
...interest rate for good i (between periods t-1 and t). The intertemporalsubstitutionelasticity for
good i ... one good ('consumption') then this is the conventional definition for the elasticityof intertemporalsubstitution (the numerator is the change in consumption growth and ...
A Kapteyn, KJ Kleinjans… - Journal of economic behavior & …, 2009 - Elsevier
... Furthermore, estimates of the intertemporalelasticityofsubstitution based on the estimated welfare
functions are plausible and of a similar order of ... and to analyze the sensitivity of saving and consumption to the interest rate (ie, the intertemporal rate of substitution). ...
R Rodríguez, F Restoy… - Journal of International Money and …, 2002 - Elsevier
...substitution , the coefficient that governs the value of the model-derived volatility is unambiguously
the inverse of the elasticityofintertemporalsubstitution. To the extent that, unlike in the case of
risk aversion, a high aversion to intertemporalsubstitution of consumption is not ...
F Gomes… - The Journal of Finance, 2005 - Wiley Online Library
... Zin preferences, which allows us to separate risk aversion from the elasticityofintertemporal substitution (EIS). ... Once we have solved for the policy functions, we can substitute those in the ...
Once we have these distributions, the unconditional mean consumption for age t can then ...
... real rate of interest, ao 0, a1 = a = the elasticityofintertemporalsubstitution, v, = ct Et 1 ... Mankiw,
NG, JJ Rotemberg and LH Summers, 1985, Intertemporalsubstitution in macroeconomics,
Quarterly ... Muellbauer, J., 1983, Surprises in the consumption function, Economic Journal 93 ...
... For this specification, our estimate of risk aversion is the inverse of the elasticityofintertemporal substitution. We estimate the preference parameters γ, along with the trading cost ψ and ... the
sensitivity of consumption growth to interest rate movements. This motivates our study ...
R Blundell, L Pistaferri… - 2004 - discovery.ucl.ac.uk
... (1986) and Hotz, Kydland and Sedlacek (1988) for tests of intertemporalsubstitution in labor ... estimate structural parameters such as the elasticityofintertemporalsubstitution or the extent
of ... Importantly we also allow the budget elasticity to shift with observable household ...
... In contrast, including consumer confidence has significant implications for intertemporal substitution: adding consumer confidence substantially decreases estimates of the intertemporal elasticityof... where 1/σ is the intertemporalelasticityofsubstitution in consumption, a key ...
... 9Fehr and Götte (2007) estimate an intertemporalelasticityofsubstitution of about 1.1 by using
a unique data ... Bc is the elasticityofintertemporalsubstitution of consumption (EIS consumption... intertemporalelasticity (response to anticipated and to unanticipated changes in wages ...
E Battistin, A Brugiavini, E Rettore… - The American …, 2009 - ingentaconnect.com
... at S = 0+, so any discontinuity detected in the outcome of interest (consumption) may signal ... that
the standard Eulerequation, in which consumption growth is a function of intertemporal prices
and ... However, in Blau's model the causal effect of retirement on consumption is zero. ...
... Zin and Weil Eulerequation which is derived from the inter-temporal optimization problem ... is that
it allows for the separation between the elasticityofintertemporalsubstitution and risk ... next goal
is to derive the value of σ, the intertemporalelasticityofsubstitution in consumption. ...
M Pakoš - Journal of Business and Economic Statistics, 2011 - ASA
... σ > 0 is a (biased under nonhomoth- eticity) measure of the elasticityofintertemporalsubstitution
(EIS ... not negligible, and thus affects the estimates of both the intratemporal and intertemporal
substitu- tions. ... on the homothetic case η = 1, in which the true elasticity of intratemporal ...
JM Shapiro - Journal of Public Economics, 2005 - Elsevier
... is larger than that observed for caloric intake, reflecting substitution towards lower ... CSFII—both
reveal a statistically significant decline in food consumption over the ... of the intertemporalelasticity
of demand for calories, sometimes called the elasticityofintertemporalsubstitution. ...
D Hatzinikolaou… - Southern Economic Journal, 1995 - JSTOR
... the risk premium, the time preference, and the elasticityofintertemporalsubstitution in consumption. ... expenditure are positively correlated with shocks to private consumption, but
uncorrelated ... however, has no effect on time preference and intertemporalsubstitution, whereas ...
... and sign, of the consumption change can pin down the elasticityofintertemporalsubstitution. ...
α, the change in consumption at retirement identifies the intertemporalelasticityofsubstitution
parameter γ. ... at retirement grows larger as the taste for intertemporal smoothing increases ...
JY Campbell, J Cocco, F Gomes… - European Finance …, 2001 - rof.oxfordjournals.org
...Eulerequations and the intertemporal budget constraint around the exact solution that applies
if the inter- temporalelasticity of substitution... The elasticityofintertemporalsubstitution matters
because changing expected returns have opposing income and substitution effects ...
Y Zhang… - Applied Economics, 2004 - Taylor & Francis
... of consumption growth to interest rate changes depends on the value of σ, the intertemporal elasticityofsubstitution. ... σ, modest rises in the interest rate may generate a positive substitution
effect large ... An empirical study of the 'rule of thumb' consumption model in five East Asian ...
T Duncan - Documentos de Trabajo (Banco Central de Chile), 2003 - dialnet.unirioja.es
... and McDermott (1998), the intertemporal and intratemporal elasticities of substitution affects the
extent of the HLME. On one hand, the intertemporalelasticityofsubstitution σ measures ... return.
Larger values of this coefficient imply larger reactions to movements in intertemporal...
E Skoufias - Journal of Economic Development, 1994 - jed.or.kr
... The empirical results suggest significant intertemporalsubstitution in the labor supply of females
although no ... of wealth of household i in period t, ßk is the inter- temporalsubstitutionelasticity
of labor ... context of the seasonal model considered here, ßk is the elasticity relevant for ...
R Bansal, D Kiku… - Manuscript, Duke University, 2007 - nber.org
... Marginal Rate of Substitution (IMRS), mt+1, is mt+1 = θ log δ − θ ψ ∆ct+1 + (θ − 1)rc,t+1, (5) 4
Page 6. ... As the elasticityofintertemporalsubstitution decreases to 0.5, the ... e,j ≡ Cov(ea t+1,ua
r,j,t+1) Var(ea t+1) , while the exposure of asset returns to transient risks in consumption is ...
D Hatzinikolaou - Economic Modelling, 1999 - Elsevier
... Y;) + e,, (3) where r, is a real interest rate and в is the elasticityofintertemporalsubstitution. ...
spending and consumer attitudes toward risk, time preference, and intertemporalsubstitution:
an econometric ...Consumption and capital market imperfections: an international comparison ...
...intertemporal budget constraint implicitly assumes a certain market structure and the ... recursive substitution, one gets that log consumption is given by the sum of innovations from ... cross sectional
data or longitudinal data, one can follow the evolution of consumption inequality for ...
R Garcia, É Renault… - manuscript, University of Montreal, …, 2005 - Citeseer
... then quite naturally ρ = 1 − ϕ, with the elasticityofintertemporalsubstitution σ = 1 1-p . ... this
specification offers potentially a natural disentangling between risk aversion and intertemporal substitution. ... according to the habit formation approach, the reference consumption level St ...
... model is the intertemporalelasticityofsubstitution and not the coefficient of relative risk
aversion. ... An implication of a large class of intertemporal asset pricing models is ... t. The
parameter -y governs intertenporal substitution of consumption, with ...
D Robertson… - Oxford Bulletin of Economics and …, 1993 - Wiley Online Library
... The results suggest that the inter- temporalelasticity is statistically different from zero, but ... a more
noticeable change in significance levels for the intertemporalelasticityofsubstitution for consumption... 'IntertemporalSubstitution in Consumption', Journal of Political Economy, Vol. ...
... t consumption of good I; r is the inverse of the elasticity of inter-temporalsubstitution. ... would hold
under the assumption that y = 1, so that the intertemporalelasticityofsubstitution equals one. ...
g and a follow random walks {ip = 1) or the elasticityofintertemporalsubstitution (1/7 ...
CI Lee - Journal of Economic Dynamics and Control, 2008 - Elsevier
... spent investing in human capital does not permit micro-empirical studies on intertemporal substitution of the ... MathML source View the MathML source where c t is the consumption at time
t ... to year t-1), β is the parameter for the intertemporalelasticityofsubstitution (henceforth, IES ...
T Bayoumi… - Staff Papers-International Monetary Fund, 1995 - JSTOR
... at t- 1, 3 is a subjective discount factor, C is the intertemporalelasticityofsubstitution, and R ... of
the assumptions that capital markets are integrated and that rates of intertemporalsubstitution
are equal ... income that is used to control for the effect of domestic income on consumption. ...
... operator conditional on the information available at time t, σ>0 is the intertemporalelasticityof substitution (IES), and u(t ... of a durable good in period t, and ɛ>0 is the elasticity of substitution...
first-order condition that the user cost equals the marginal rate of substitution between the ...
PA Trostel… - Economic Inquiry, 2001 - freepatentsonline.com
... Although there is clearly some room for such substitution, its scope seems limited. ... Model (3)
uses consumption dated concurrently with the survey year. ... [29] The estimated intertemporal elasticityofsubstitution is 0.88 and is marginally statistically significant. ...
H Osano… - International Economic Review, 1991 - JSTOR
... and labor supply: (1 - a) -1 and (,/ - 1)-1 represent the elasticityofintertemporalsubstitution in consumption and ... term, 6 is the rate of technical progress, o- is the substitution rate between ... are
inadequate for our purpose because we must use a quarterly consumption data series ...
... We assume that the Constant Elasticity of Substitution (CES) utility function represents ...
Mankiw (1985) estimated the IES for consumption of durable goods. Our ...intertemporal elasticityofsubstitution of durable good consumption is ...
LL Tesar - Journal of International Economics, 1993 - Elsevier
... Hall, RE, 1988, Intertemporalsubstitution in consumption, Journal of Political Economy 96 ... PM
and C. Stuart, 1992, Does the elasticityofintertemporalsubstitution differ across ... Mao, C., 1989,
Estimating intertemporalelasticityofsubstitution: The case of loglinear restrictions ...
CC Bautista - The Philippine Review of Economics and Business, 1999 - Citeseer
... In this model, it is also the intertemporal marginal rate of substitution. 2 The pioneering article
on multiperiod asset pricing along these lines was written by Lucas (1978). ... 3 It is well known that
the inverse of α is the elasticityofintertemporalsubstitution. ... of consumption data. ...
M Pakoš - GSIA Working Papers, 2007 - tepper.cmu.edu
... that the elasticityofintertemporalsubstitution IES for the total consumption expenditures is
economically negligible. ... They estimate both intratemporal and intertemporalequations... same
preference specification but estimating the elasticity of substitution using cointegrating ...
... the intratemporal elasticity of substitution dominates over the intertemporalelasticityofsubstitution
and then ... test the effectiveness of fiscal expansion, the intratemporal elasticity of substitution... the
previous subsection, the long-run elasticities of substitution between government ...
M Finn - Journal of International Money and Finance, 1989 - Elsevier
... function model; namely, one characterized by a zero elasticity of substitution across consumption
and real ... Notice from equation 3 that (1 Q) is the elasticityofintertemporalsubstitution, ie, it
measures the responsiveness of the percentage change in consumption to changes in ...
... future consumption up to the point where the marginal rate of substitution equals the ... levels of
(expected) real interest rates rt+ 1, a larger elasticityofintertemporalsubstitution cq (or ... that the
only legitimate role of lagged information variables in explaining future consumption is in ...
... of substitution (k * $), so F! " must be nonlinear (F)) "* $ ...Inter$temporal expansion paths (and
Engel curves for periods or states) are linear but not through the origin. ... For example, Attanasio
and Weber (1995) estimate the elasticityofintertemporalsubstitution to ...
AD Viard - Applied Economics, 1997 - Taylor & Francis
... real interest rate variations, with a constant of propor- tionality equal to 1/A, the elasticity of intertemporal substi- tution. ... 1983), Hall (1988), and Campbell and Mankiw (1989, 1990 and 1991),
a consistent estimate of the elasticity of intertem- poral substitution can be ...
...intertemporalsubstitution of consumption is very low. Following a positive technology ... consumption from a utility function and inter-temporal budget constraint that directly ... expected
real interest rate, and represents the intertemporalelasticityofsubstitution. For ...
R Bansal, V Khatchatrian… - European Economic Review, 2005 - Elsevier
... The slope coefficient in the regressions that link valuation ratios to consumption volatility is ... carlo
based, finite sample empirical distribution for the various parameters and test statistics of interest. ...
present value restriction is that (2) View the MathML source This equation says that ...
... Fitting the life expectancy and health spending data to our health technology, equation
(11), we find ... implies, for example, that consumption will not depend on health status), and
that quality of life is a constant elasticity function of health status. ...
Y Ait‐Sahalia, JA Parker… - The Journal of Finance, 2004 - Wiley Online Library
... The real test of the model lies in the Eulerequation for luxury goods, which evaluates the ... Second,
we estimate the elasticityofintertemporalsubstitution with our luxury data. ... Fourth, we test whether
our preferred measure of luxury consumption explains the cross-section of stock ...
M Kuismanen… - ECB Working Paper No. 572, 2006 - papers.ssrn.com
... (primarily, the elasticityofintertemporalsubstitution, and, in some instances, the rate ... approach
is its inability to address questions such as how consumption reacts to unexpected changes in
income ... Thus, the Eulerequation allows estimation of intertemporalsubstitution effects, ...
JH Stock, JH Wright… - Journal of business and economic statistics, 2002 - ASA
... Equa- tion (1) is the structural equation, and ‚ is the scalar parameter of interest. ... where ƒ is the
coeffi cient of relative risk aversion (here also the inverse of the elasticityofintertemporal substitution), ãctC1 is the growth rate of consumption, rtC1 is the log gross return on some ...
O Attanasio - Fiscal Studies, 1997 - Wiley Online Library
... It will be possible, for instance, to assess the size of the elasticityofintertemporalsubstitution -
that is to ...estimates of our structural parameters to evaluate the compensated and uncompensated
wage elasticity of male ... rationalised within an intertemporal optimisation framework. ...
RE Hall - Journal of Political Economy, 2009 - JSTOR
... The first property is risk aversion and intertemporalsubstitution in consumption. With additively
separable preferences across states and time periods, the coefficient of relative risk aversion
(CRRA) and the intertemporalelasticityofsubstitution are reciprocals of one another. ...
S Alan… - Economics Series Working Papers, 2006 - economics.ouls.ox.ac.uk
... on the inverse of this parameter, the elasticity of intertem% poral substitution (EIS ): ... to estimate
the intertemporal price elasticity (the EIS) without some intertemporal varia% tion ... of parameters
and different income processes within the time separable iso%elastic utility framework. ...
...interest rate and have the same utility function—in particular, they have the same intertemporal elasticityofsubstitution and discount ... discount rates differ across provinces then so will the constant
terms (a). Similarly, if intertemporal elasticities of substitution vary then ...
OP Attanasio… - The Economic Journal, 2002 - Wiley Online Library
... such an effect, log utility (ρ=1) implies that income and substitution effects cancel ... in the IRA
programme on consumption is ambiguous and depends on the elasticityofintertemporal substitution. ... In summary, while the results of both the consumption and asset tests for the 1982 ...
Y Lavi - Israel Economic Review, 2003 - boi.gov.il
... The expansion also facilitates the estimation of the elasticityofintertemporalsubstitution. ... Note
that this elasticity denotes intertemporalsubstitution, and that the larger this elasticity, the more
effective will monetary ... where θ = λσ and σ is the intertemporalelasticityofsubstitution. ...
... Hence, the estimator of the intertemporalelasticityofsubstitution which is based only on the growth
rate of ... nondurable and durable goods. We assume that the Constant Elasticity of Substitution...
nondurable good, P2(t), is equated with the marginal rate of substitution based on ...
... others who estimate the IES (Intertemporalelasticityofsubstitution in consumption). Second, ... Result
1: the real marginal rate of substitution (aka stochastic discount factor) is, to a ... Note that a similar
argument can be made for the intertemporalelasticity of labor supply. ...
GE Blanchard, E Luttmer, J Parker - 2005 - aeaweb.org
... Epstein, Larry, and Stanley Zin (1989). “Substitution, Risk Aversion, and the Temporal Behavior
of Consumption and Asset Returns: A Theoretical Framework,” Econometrica, 57, 937-969. ...
“Mismeasurement of the ElasticityofIntertemporalSubstitution The Role of ...
... Hall (1988) estimated intertemporalelasticityofsubstitution with a log-linear model but
rejected the Hansen-Singleton one-period lagged instruments. ... relative risk aversion and elasticity of substitution among other advantages. They chose four ...
RA Braun… - KIER Discussion Paper, 2011 - repository.kulib.kyoto-u.ac.jp
... evidence from macroeconomic data about the magnitude of the intertemporalelasticityof substitution (IES) is ... they allow us to make a meaningful distinction between intertemporal substitution and risk ... maintained hypothesis of a large IES the response of consumption to interest...
N Khorunzhina - 2011 - challenger.library.pitt.edu
... ticity of Substitution to analyze the degree of heterogeneity in these coefficients. I find that ... 81
APPENDIX D. INTERTEMPORALELASTICITYOFSUBSTITUTION 85 ... measured with error
(ie, assumed to be classical). The consumptionEulerequation belongs ...
... The coefficient on the expected return is the elasticityofintertemporalsubstitution (EIS). ... growth
of longer horizons will more accurately measure intertemporalsubstitution. First, ... a more accurate
measure of how people substituteconsumption over time. In addition to ...
... However, an elasticity of intertermporal substitution equal to one implies ... A substantial empirical
literature including Hall (1988) and Campbell (2003) estimates the elasticityofintertemporal substitution to be low and sometimes negative in the following regression...
...IntertemporalElasticityofSubstitution (EISt,h) is defined as follows: ... Such a substitution does not
seem very intuitive and requires comparison with the definition given in ... use that fact to illustrate
the main message of the paper - it is ElasticityofIntertemporalSubstitution which is ...
... long-run labour supply.3 A low value of the elasticityofintertemporalsubstitution means that ... labour
supply elasticity indicating the size of the income and substitution effects ... equal to the inverse
of the downpayment times the intertemporalelasticityofsubstitution, s. Consumption...
... Among many issues that are related to inter-temporalsubstitution, one of the most ...intertemporal elasticityofsubstitution and φ is a constant. This equation captures the ...consumption level
at age 60, after we control for household observables ia X which ...
...substitution improves the fit of an otherwise standard calibrated macro model. The fi% ... tertemporal substitution generate the predictions that the degree of forward%lookingness ... the elasticityof intertemporalsubstitution. Furthermore, it suggests that monetary policy ...
A Semenov - Working Papers, 2003 - dept.econ.yorku.ca
...estimate of the elasticityofintertemporalsubstitution is in the conventional range and significantly
different from the ... Keywords: incomplete consumption insurance, intertemporalsubstitution, limited
asset ... rate of per capita consumption is consistent with the low short-term real ...
... risk aversion concerns the willingness of an investor to move consumption between states ... an
alternative specification for preference which can disentangle risk aversion from intertemporal substitution. ... 1 − ρ)/(1 − 1/ψ) where ψ is the elasticityofintertemporalsubstitution, ρ and β ...
T Fujii - Discussion Papers, 2009 - econ.kobe-u.ac.jp
... The appropriate estimation of Eq.(7) would allow us to obtain a consistent estimate of the
intratemporal elasticity of substitution between private and government consumption, 1=®. Further-
more, we can estimate the intertemporalelasticityofsubstitution, 1=°, and ...
... In particular, using the constant elasticity of substitution (CES) utility function, I estimate the intertemporalelasticityofsubstitution (IES), a parameter measuring the response of household's consumption growth to a change in a rate of return, and relative risk aversion (CRRA). ...
... Page 3. intertemporalsubstitution (EIS), which is the reciprocal of the coefficient of ... as an elasticity
puzzle (Guvenen, 2002). ... Nonetheless, the second equality in (3) states that for intertemporal
optimization the expected consumption is formed according to the riskless-rate. Page 9. ...
... The magnitude of this effect will be determined by (1/oi) , the intertemporalelasticityofsubstitution. ...
mentioned, evidence with respect to the role of interest rates on the intertemporal allocation of ...
to (t-1) . A high value of the coefficient indicates that the elasticity of substitution is ...
P Data, H Bunzel, BJ Christensen, P Jensen… - 2000 - emeraldinsight.com
... panel data on both home and market hours, as well as market consumption, and this ... in Rupert,
Rogerson and Wright (1995) to estimate the elasticity of substitution between cmt ... The intertemporal elasticityofsubstitution is given by a2, while a^ tells us how hours move over time ...
S Hyde, M Sherif - Money Macro and Finance (MMF) Research Group …, 2004 - repec.org
... to discriminate between two implies which might be of interest to empirical... The estimated elasticity ofintertemporalsubstitution, σ, is small but insignificant, and estimates for ... Weber, EC, 2000,
“'Rule-of Thumb' consumption, intertemporalsubstitution, and risk aversion”, Journal ...
K Natalia, G Wayne Roy - 2011 - mpra.ub.uni-muenchen.de
... 2 Page 3. 1 Introduction Until recently, little was known about differences in intertemporal substitution and risk aversion ... ity in these parameters, using microdata, is to start with models that
imply constant intertemporalelasticityofsubstitution (IES) or relative risk aversion (RRA). ...
... factor, σ is the intertemporalelasticityofsubstitution (IES), and γ denotes the coefficient of 3 Page
6. ... The mean and standard deviation of the log real interest 10 Page 13. rate and consumption
growth slightly differ from those of Campbell (2003) and the correlation is lower. ...
... A low value of the elasticityofintertemporalsubstitution means that the marginal utility of consump ...
supply elasticity indicating the size of the income and substitution effects ... is equal to the inverse
of the downpayment times the intertemporalelasticityofsubstitution s. Consumption...
... highly significant with the theoretically expected sign, indicating that the elasticity of substitution
ranges from ... 4.2 The IntertemporalElasticityofSubstitution Let us now turn to GMM estimation
of a. In the second ... include the growth rate of C21 in place of the real consumption ratio. ...
... actual estimates of the elasticity of the intertemporalsubstitution and relative prudence. ... A large
and growing empirical literature investigates the sensitivity of consumption (or, equivalently, saving)
to interest rates (the elasticityofintertemporalsubstitution) and to uncertainty ...
A Kapteyn, K Kleinjans… - CentER Discussion Paper …, 2008 - papers.ssrn.com
... Furthermore, estimates of the intertemporalelasticityofsubstitution based on the estimated
welfare functions are plausible and of a similar order of magnitude as other estimates found
in the literature. ... rate (ie, the intertemporal rate of substitution). ...
E Telatar, F Telatar… - Pakistan Development Review, 2000 - pide.org.pk
... The commodity-specific intertemporalelasticityofsubstitution and the intertemporal own-price elasticity for a ... signs of αi and,γii because wit >0. Since all of the estimated parameters for γi in
Table 1 are positive, the commodity-specific intertemporal elasticities of ...
... UD t F t ,( ) u D t F t ,( ) [ ] ln= 1 γ⁄ 1= Page 5. 5 ; and (4) and ; (5) For this utility function, represents
the intratemporal elasticity of substitution between domestic and foreign goods consumption,
and represents the intertemporalelasticityofsubstitution of the composite good. ...
... 1982, 1983), or is it that its reciprocal, the intertemporalelasticityofsubstitution, is small ... a group
of agents who all have large, while different, elasticities of intertemporalsubstitution. ... we have
two groups of agents with the same elasticityofintertemporalsubstitution ψ, denoted by ...
OP Attanasio… - … markets' liberalisation and the role of …, 1993 - books.google.com
... 2.1. The elasticityofintertemporalsubstitution is now larger (0.59), but very
poorly deter- mined. ... 45. Hall, RE (1988)'IntertemporalSubstitution in Consumption', Journal of Poli- tical Economy, 96: 339-57. Hansen ...
...substitution (AES, hereafter for convenience) and the intertemporalelasticityofsubstitution...
approach. The average elasticity of import demand with respect to a permanent increase in real ...
or future import consumption (intertemporalsubstitution). In fact, if the parameters of habit ...
... Page 8. • The elasticityofintertemporalsubstitution (EIS) is ... the substitution effect, while if ψ is
greater than one, then the substitution effect dominates ... Solving out for expected consumption
growth allows the estimation of the intertemporalelasticityofsubstitution and provides an ...
... where * > 0 is the relative risk aversion and 1/* is the intertemporalelasticityofsubstitution, the EulerEquation (10) becomes ... aversion parameter. In fact, in some cases the author obtains an elasticityofintertemporalsubstitution not significant. Besides, Hall (1988) discussed the ...
CM Buch, J Doepke, C Pierdzioch… - 2002 - kms2.isn.ethz.ch
... expectations operator, and ϑ = the reciprocal of the intertemporalelasticityofsubstitution. Foreign
variables are denoted by a star. ... rates of substitution of consumption between countries help
predicting current dif- ferences by running the following regression: EI , (1') ∑ ...
... based asset pricing model with CRRA un- tility functions (hence the elasticityofintertemporal substitution (EIS) of ... of persons who are actively adjusting their marginal rates of substitution of consumption... expecting the market return to be high, will defer their consumption to later ...
H Bakhshi… - WORKING PAPER SERIES …, 2000 - papers.ssrn.com
... (3) ( ) θ θ − = − 1 1 t t c cU , where 1/θ is the intertemporalelasticityofsubstitution. ... (5) So if
there is no substitution, then β=r, as with a conventional financial annuity with infinite life.
Page 8. 11 ... Comparing this with an econometrically estimated elasticity...
... As is well-known, the elasticityofintertemporalsubstitution in consumption is the inverse of ... Thus,
we infer from (3.14) that reducing intertemporalsubstitution has a very different ...Consumption
growth at different levels of time aggregation have different autocorrelation patterns ...
C Leith… - European Economic Review, 2005 - Elsevier
... economies, all parameters aside from the discount factor and the intertemporalelasticityof substitution were found ... imply that consumers implement identical consumption plans, we can substitute for the ... also real interest rate effects and the impact of the consumption taste shock ...
T Kano - Journal of International Money and Finance, 2008 - Elsevier
... u(C) = C 1−1/σ /(1 − 1/σ), where σ is the elasticityofintertemporalsubstitution. ... coefficient (σ −
1)c + 1 on the second term captures the intertemporalsubstitution effect, the ... representative
consumer changes the current account–net output ratio to smooth consumption in response ...
FAR Gomes… - Economia Aplicada, 2010 - SciELO Brasil
... Cavalcanti, C. (1993), 'Inter-temporalsubstitution in consumption: an empirical investigation for ...
Vaidyanathan, G. (1993), 'Consumption, liquidity constraints and economic development ... Yogo,
M. (2004), 'Estimating the elasticityofintertemporalsubstitution when instruments are ...
RE Hall - Modern business cycle theory, 1989 - stanford.edu
... that shadow price involves a consideration of the entire inter- temporal planning problem ... case,
Selden's results show that it is unambiguously the elasticityofintertemporalsubstitution and not ...
source of a down- ward bias in estimates of the intertemporalelasticityofsubstitution. ...
P Pagano - Journal of the Japanese and International Economies, 2004 - Elsevier
... is the relative risk aversion (RRA) coefficient and also the inverse of the intertemporalelasticity ofsubstitution. ... and use instruments that are distinct from lagged real returns and consumption
growth but ... are lagged nominal stock return, lagged nominal short term interest rate, the ...
... From the derivation shown in the last section, σ is actually the elasticityofintertemporal substitution, which captures the substitution effect of changes in the interest rate on consumption over time. It is difficult to separate the substitution effect from ...
... conditional expectations of consumption and of the asset return. One can substitute out the ... equation of state consumption: AlogCi,t+1 = ci + λ1 log(1 + ri b,t+1) (10) +λ2 ⎡ ⎣ n Σ p=1,p/ei ... for
the elasticityofintertemporalsubstitution, EIS, and ηi,t+1 is the regression error term. ...
... and not significantly different from zero. Life%cycle theory predicts that the intertemporalelasticity ofsubstitution, captured here by the wage coeffi cient, must be positive. Thus ... while the APE
remains relatively flat. In addition, the wage elasticity is found to be ...
... If this consumer has a CES utility function with an intertemporalelasticityofsubstitution a and
a pure rate of time pref ... Variables are converted to real values with the aggregate defla- tor for
nondurable consumption. Every variable but the interest rate is in logs and per capita. ...
M Rossi - Economics Discussion Papers, 2005 - vwww.essex.ac.uk
... They suggest an elegant axiomatisation that allows disentangling the intertemporalsubstitution
from the risk aversion factor. Within ... constant elasticityofintertemporalsubstitution equal to 1/α. ...
is compensated by the remuneration for postponing consumption, ie the interest rate. ...
... ity of substitution: estimates of 1=¾ are essentially unchanged under the CAPIH in both size and
significance level. ... Finally, estimates of the intertemporalelasticityofsubstitution generally fall
into the same 0.13-0.15 range observed under the CAPIH. 6 Summary and Conclusion ...
... It is also increasing in the expected return on wealth for retired investors whose elasticityof intertemporalsubstitution (1/7) is smaller than the wealth elasticity of consumption. ... Page 15. return
on financial wealth dominates the substitution effect and they choose to consume the ...
... The intertemporalelasticityofsubstitution measures consumers' willingness to substitute consumption between different points in time. ... As before the constraints define an intertemporal
budget constraint, but this time it has to ... By repeated substitutions, the RHS can be written as ...
... constraints do not bind, it is still possible to analyse intertemporalsubstitution effects using ... This
yields evidence of correlation of consumption over four consecutive quarters. ... price elasticities
have been also computed, as well as the intertemporalelasticityofsubstitution and a ...
R Reis - Journal of the European Economic Association, 2009 - Wiley Online Library
... There- fore, distinguishing between intertemporalsubstitution and risk aversion does not affect
the ... Moreover, the intertemporalelasticityofsubstitution does not enter the formula for the costs ...
calibrated β, so when he lowered the elasticityofintertemporalsubstitution by raising θ ...
... Varying the intertem- poral elasticity of substitution several variants of the 'market ... in the case of
CD intertemporal preferences with unitary intertemporalelasticityofsubstitution all the ... With CD intertemporal preferences explicit solutions for the consumption behaviour can be ...
... Even if expected excess returns on risky assets over safe assets are constant, time0variation
in real interest rates is ... is the special case of power utility in which both the coefficient of relative
risk aversion and the elasticityofintertemporalsubstitution in consumption equal one. ...
N Rossi - Fiscal policy, stabilization, and growth in developing …, 1989 - books.google.com
... problems with aggregate-savings equations, estimates the elasticityofintertemporalsubstitution
in (private ... where the use of IDA resources is common), intertemporalsubstitution is weak ... restricted
model, the former parameter controls the inter- temporalelasticity of substitution...
... to liquidity constrained consumers and the intertemporalelasticityofsubstitution in consumption. ... consumption constrained by liquidity constraints, the elasticityofintertemporalsubstitution, substitution between private ... The responsiveness of consumption growth to the expected ...
... preference parameters, the constant intertemporalelasticityofsubstitution σ. ... creates a substitution
effect lowering capital accumulation. ... expected return of capital over other assets is just a function
of consumption behavior, as summarized by the consumptionEulerequation. ...
RA Amano, Bank of Canada… - 1994 - bankofcanada.ca
... productivity. The increase in productivity raises the real wage sufficiently that there is a substitution
away from leisure and into consumption. ... where is the intertemporalelasticityofsubstitution. Equation (8) implies the following econometric relationship: ... along intertemporal lines. ...
... Un- til recently, little was known about changes in risk aversion and intertemporalsubstitution
across ...intertemporalelasticityofsubstitution, and Section 8 concludes. ... plicated by the problem
of measurement errors in consumption, which, if ignored, will likely result ...
T Jappelli… - Journal of the European Economic …, 2006 - Wiley Online Library
... It is therefore of interest to check if the transition matrix is symmetric using the ... from theory the
implications for consumption mobility of popular models of intertemporal choice (PIH ... distance
between the empirical and the theoretical transition matrix of the consumption distribution. ...
... The former effect dominates if the intertemporalelasticityofsubstitution is greater that the
intratemporal elasticity of substitution... The elasticity of substitution is parameterized by θ; if the
relative price is unity ...elasticity for the demand of nontraded goods only for industrial countries. ...
... known as the stochastic discount factor or the intertem- poral marginal rate of substitution. ... puzzle
may be resolved by imposing the information of relative asset returns and consumption. ... γ is
calculated to be about 4.935, so that the elasticityofintertemporalsubstitution is about ...
E Fernandez-Corugedo, S Price… - Economic Modelling, 2007 - Elsevier
... If the intertemporalsubstitution of durable consumption exceeds that of non-durables (1/χ >
1/α), 1 will exceed unity (as in ... for the driving variables, we can in some cases obtain closed form
solutions and use the Eulerequation to substitute out for consumption growth and ...
... where is the (constant) elasticity of substitution between C and C2 and ωi ... countries apart from:
(i) Effects of differences in the elasticityofintertemporalsubstitution in consumption... on the real
exchange rate is simply the domestic intertemporalelasticityofsubstitution (hence, both ...
F Perez-Sebastian - Journal of Monetary Economics, 2000 - Elsevier
... Growth effects are however possible along the transition. (9) and (17) give us the steady-state interest rate (18) Condition (14), in turn ...Estimates of the inverse of the intertemporalelasticity ofsubstitution between present and future consumption go from 1 to 3.5 (Hall ...
RE Hall - Manuscript, Stanford University, 2007 - nber.org
... draw primarily upon research at the household rather than the aggregate level. The first property
is risk aversion and intertemporalsubstitution in consumption. With additively ... and the intertemporal elasticityofsubstitution are reciprocals of one another. But there ...
... consumers aim at smoothing expected discounted marginal utility, while the potential peer effect
is formulated with respect to household consumption. After-tax interest rate heterogeneity, in
turn, exploits potential differences in the intertemporalsubstitution motive within ...
LP Hansen, JC Heaton… - Journal of Political Economy, 2008 - Citeseer
... linear specification of the discount factor (3) assumes that the intertemporalelasticityofsubstitution
is equal to ... will illustrate, this model provides an important role for the intertemporal composition
of ... of the representative consumer is given by the constant elasticity of substitution...
...consumption and asset holdings in order to maximize the expected discounted utility function
(1) subject to an intertemporal budget constraint ... the high level of real rates may have led to
increased uncertainty about future real rates, deterring substitution of consumption in time. ...
... the present depends directly on the magnitude of the intertemporalelasticityofsubstitution
(σ > 0). If the real interest rate is constant or the intertemporalsubstitutionelasticity is zero,
then ... Real interest rate movements significantly explain consumption in ...
SK Annim, I Dasmani… - 2011 - mpra.ub.uni-muenchen.de
...Inter-TemporalConsumption Decisions under Uncertainty The intertemporalconsumption
decisions under uncertainty are ... fail to distinguish between the importance of intertemporal substitution and risk ... tends to be determined by the elasticityofintertemporalsubstitution as well ...
... in AIDS as proposed in this paper and if one assumes that the elasticityofintertemporal substitution is equal ... plans his/her consumption in a time consistent way and the intertemporal
utility function ... an elasticity equal to p, and partly dependent on prices with an elasticity equal to ...
E French - Review of Economics and Statistics, 2004 - MIT Press
...estimates of the model of wage dynamics and estimates of the intertemporal elas- ticity of substitution. ... where U is the expected discounted present value of lifetime utility, cit is consumption,
v is some ...intertemporalelasticityofsubstitution, which is the object of interest in this study ...
... Forecast, ElasticityofIntertemporalSubstitution... Page 2. 2 1. INTRODUCTION Do people substitute consumption over time in response to a change in the expected real return? ... term structure of consumption growth (which is defined as the consumption growth from ...
SC Ahn… - International Journal of Sport Finance, 2007 - public.asu.edu
... 0 1 ∂ 2 0 where and for j = 1, 2. The signs of and depend on the intertemporalelasticityof substitution (IES) in the fan's attendance at the baseball games, the degree of the fan's willingness
to substitute his current ... 1 , (3) where ε1 is the price elasticity of current demand, and ...
KK Lewis - European Economic Review, 1997 - Elsevier
... However, intertemporalsubstitution requires observations for a given country for at least ... that =
0, the interest rate coefficient represents the elasticityofintertemporalsubstitution in consump ...
However, empiricalconsumption studies have typically found this coefficient to be close ...
A Inoue, L Kilian… - Journal of Money, Credit and …, 2009 - Wiley Online Library
... Because the intertemporalelasticityofsubstitution is 1/ρ, this midrange estimate implies ρ= 5,
which is ... Hence, it is common to substitute the conditional expectation of a given household's ... is
no obvious alternative to this approach when testing whether consumption growth is ...
... 1949-95. An intertemporalelasticityofsubstitution of 2.5 is used,16 and consumption
is measured Page 20. Fisherian Capital Tax Incidence - 16 ... So the appropriate
“intertemporalsubstitutionelasticity” should reflect the elasticity of expected ...
... elastiticies of substitution are more likely to vary with changes in income since the utility loss from
delaying consumption of these goods is relatively small. Using a more conven- ...intertemporal elasticityofsubstitution and are thus "easier to postpone". Therefore, one ...
CD Carroll - The Quarterly Journal of Economics, 1997 - qje.oxfordjournals.org
... Solving the Model I assume that the consumer solves the intertemporal optimi- zation problem: ...
the baseline income growth and interest rate parameter values, be- cause with an interest rate
less ... horizon is arbitrarily long, it remains true that the growth rate of consumption will be ...
... of relative risk aversion (RRA) or its inverse, the elasticityofintertemporalsubstitution (IES), 1
is a ... independent this coincides with the reciprocal of the intertemporalelasticityofsubstitution
(IES) of ... goods and services and the implicit price deflator of government consumption. ...
J Darby… - Scottish Journal of Political Economy, 1996 - Wiley Online Library
... These models typically incorporate indirect crowding-out effects induced by interest rate changes ...
provided an explanation for a time-varying marginal rate of substitution between aggregate
government spending on goods and services and private consumption on non ...
... husbands. In particular, the intertemporalelasticityofsubstitution of wives is about
half the elasticity for husbands or, equivalently ... t first order conditions of the intertemporal collective model imply that agent 1's marginal rate of ...
... show formally that when consumers value government spending, it can substitute for and ... and
government purchases in category i and 1/1−φ is the intertemporalelasticityofsubstitution. ... An empirical analysis on the substitutability between private consumption and government ...
M Horvath - Journal of Monetary Economics, 2000 - Elsevier
... ψ controls the degree of risk aversion and is inversely proportional to the elasticityofintertemporal substitution. ... by a CES index of intermediate input quantities, in (7), with elasticity of substitution...
The firms' intertemporal decision at time t concerns the level of capital stock that is ...
... is subject to a larger degree of habit persistence and a smaller elasticityofintertemporal substitution than other ...estimates of equation (18) gave small and imprecise estimates of the intertemporalsubstitution parameter, and ... 17- renters, Che implicit consumption series would ...
OP Attanasio - Handbook of macroeconomics, 1999 - Elsevier
... a famous paper, Hall (1978) used what is the main implication of the intertemporal optimisation
problem ... they act so to keep the expected (discounted) marginal utility of consumption constant ...
condition is equivalent to the equalisation of the marginal rate of substitution to relative ...
M Browning… - Investigaciones económicas, 1994 - dialnet.unirioja.es
... In this case the elasticityofintertemporalsubstitution is not constant. 5 See, for instance,
Hall (1988). ... The problem becomes even more serious if the elasticity of substitution is
not constant but a function of various demographic variables. ...
JY Campbell - Handbook of the Economics of Finance, 2003 - Elsevier
... I = 6 U'(Ck,t+ )/U'(Ck,t) is the intertemporal marginal rate of substitution of the ... but breaks the tight
link between the coefficient of relative risk aversion and the elasticityofintertemporalsubstitution
I discuss ... log 6 + Yg ( 17) 2 where g is the mean growth rate of consumption Since g ...
AL Robb… - Canadian Journal of Economics, 1989 - JSTOR
... Les resultats impliquent aussi que la forme fonctionnelle des equations d'Euler devrait etre
suffisamment ... recession (see Flavin, 1981) and how much is due to higher real interest rates or ...
the endogeneity of HNWR, we turn to our regression results for consumption and income. ...
... st s s t st s s t t x E d E h q + ∞ = + ∞ 1 1 * δ ρ δ τ (6) where ( ) δ δ π − + + − = 1 u k h w
and τ is a constant that depends on both the elasticityofintertemporalsubstitution and
the elasticity of substitution between housing and consumption. ...
... where φ / %/!% ρ" is the intertemporalelasticityofsubstitution in consumption and ... 1429'1446.
[14] Lusardi, A. (1996), qPermanent Income, Current Income and Consumption: Evidence ... [15]
Mulligan, C. (2002), qCapital, Interest, and Aggregate IntertemporalSubstitution dur' ...
M Ogaki… - Journal of Econometrics, 1997 - Elsevier
... interpret the curvature parameter for nondurable consumption (xt ) as the longrun intertemporal elasticityofsubstitution (IES) for ... When xl x2, good I has a lower total expenditure elasticity than
good 2 ... the longrun IES because it is harder to make an intertemporalsubstitution for a ...
... (sensitivity) parameter, and ψ ≥ 0 is the intertemporalelasticityofsubstitution. ... sign of θ is
determined by the magnitudes of the risk aversion and the elasticity of sub- ... where the inter-temporal marginal rate of substitution is Mt+1 and log(Mt+1) ≡ mt+1. The logarithm of the ...
... Chapter 3: Risk Aversion and IntertemporalSubstitution in Aggregate Consumption: Finland
1975 ... too rigid and inadequate to uncover reliably the consumer's consumption behaviour ... of relative
risk aversion (CRRA) and the constant elasticityofintertemporalsubstitution (EIS) are ...
GM Korniotis - Journal of Business and Economic Statistics, 2010 - ASA
... The Eulerequation of the eco- nomic model with both types of habit formation produces a ... Such
a variable is the interest rate on Trea- sury bills, which is affected by ... are themselves determined
by economy- wide shocks that also influence state-level consumption growth, which ...
... Key words: Cointegration, ElasticityofIntertemporalSubstitution, EulerEquation JEL Classification:
C22, E21 ... Ogaki (1996). In this model, the intertemporalelasticityofsubstitution (IES) for ... (2005)
Cross-EulerEquation approach to test intertemporal and intratemporal ...
... pay period may be of interest to policy makers. Economists criticize in-kind transfer ... The
dependent variable, Cit, is the log of consumption expenditure by household i, during ... equation).13 The first category includes diary weeks starting on payday and weeks ...
... cient α has the opposite sign to that predicted by either precautionary saving theory or intertemporalsubstitution as channelled ... Second, the previous literature generally finds little evi-
dence of interest rate or precautionary saving effects in aggregate consumption data.16 ...
S Ludvigson - Review of Economics and Statistics, 1999 - MIT Press
... Consider a model of intertemporal choice in which individuals maximize the infinite sum of
instantaneous ... t, t)] f(wt, t, t) , and substitute these definitions along with equation (12) into ... low,
their marginal value today is higher than the marginal value of consumption tomorrow, and ...
... 12 There are good reasons to believe that intertemporal substitutability is low: in other words,
consumers prefer consumption to be steady over ... to give the intuitively plausible results of higher
needs at s, leading to higher consumption at s, the elasticity of substitution a needs ...
E French - Review of economic Studies, 2005 - Wiley Online Library
... allows me to identify key structural parameters such as the intertemporalelasticityofsubstitution
and the time ... Because older individuals are the ones most willing to substitute their labour supply ...
First, changes in work-hours and consumption affect neither health nor wages (other ...
... motive is the elasticityofintertemporalsubstitution. The larger this ... These are within period substitution parameter, ρ, and between periods substitution parameter ψ. ... Concerning the intertemporalelasticityofsubstitution parameter there are two alternatives. ...
TJ Lybbert… - Journal of Development Economics, 2011 - Elsevier
... we disentangle relative risk aversion (RRA) and the elasticityofintertemporalsubstitution (EIS)
in ... Attanasio OP, Weber G. IntertemporalSubstitution, Risk Aversion and the EulerEquation...
Bommier A. Risk Aversion, IntertemporalElasticityofSubstitution and Correlation Aversion ...
... factor, > 0 is the coeffi cient of risk aversion, > 0 is the elasticityofintertemporalsubstitution, and $ =
1 ... is the natural logarithm of the intertemporal marginal rate of substitution; Et[.] denotes expectation ...
We substitute this expression into the set of Eulerequations (6) to obtain a set ...
... 2However, direct empirical evidence for a low elasticityofintertemporalsubstitution in consumption (Hall (1988), Campbell and Mankiw (1989)), implies that the generality of the
Epstein-Zin ... induced status, their intertemporal marginal rate of substitution (IMRS) depends not ...
J Kim… - International Conference of the Korea Development …, 2005 - kdi.re.kr
... with ε and σ being the elasticity of substitution between the two types of consumption
and the (inverse of) elasticityofintertemporalsubstitution, respectively. ... housing consumption, respectively, are proxied by corresponding implicit ...
FC Bagliano - Ricerche Economiche, 1994 - Elsevier
... set available in period t 1, It 1, (p measures the elasticityofintertemporalsubstitution, and e, is ...
Hall (1988) argues that the interpretation of (p as measuring intertemporalsubstitution is preferable. ...
and for the possibility that government expenditure may be a substitute for private ...
... population growth , and 9 is the coefficient that measures the (constant) intertemporalelasticity ofsubstitution. ... capital goods is whether their accumulation is a perfect substitute for consumption
or ... introduction of adjustment costs in the transformation of consumption into physical ...
E Ravina - NYU Working Paper No. FIN-05-046, 2005 - papers.ssrn.com
... The coefficient on the risk-free rate represents the ElasticityofIntertemporalSubstitution (EIS). ...
to substituteconsumption across different states of nature. ... prediction of city-level aggregate consumption is the mortgage rate, followed by local unemployment and inflation rate. ...
P Evans - manuscript paper, Department of Economics, Ohio …, 2003 - Citeseer
... papers and my joint 1994 paper with Iftekhar Hasan pursue a similar approach in order to
investigate the effects of government debt on consumption. ... objective functions characterized by
a constant subjective discount rate and a constant elasticityofintertemporalsubstitution. ...
S Hyde, M Sherif - The Quarterly Review of Economics and Finance, 2010 - Elsevier
... The slope coefficients, β 1 and β 2 , measure the inter-temporalelasticity of substitution (IES)
and can be interpreted as the reciprocal of the ... The evolution of S t is governed by a nonlinear
process which ensures that the habit level remains below consumption at all times. ...
... In (2), the degree of non-separability is controlled by a parameter for the intertemporalelasticity ofsubstitution, σ. ... denotes the shadow value of durable consumption. ...elasticitysubstitution between
Ct and St is set to 1.17, based on the estimate from Ogaki and Reinhart (1998). ...
M Leippold, F Trojani… - Review of Financial …, 2008 - Soc Financial Studies
... relative risk aversion is less than 1, or, equivalently, the elasticityofintertemporalsubstitution
(EIS) is ... determines consumption and investment plans and by solving the intertemporal
max–min ... risky assets and a positive saving demand needed to smooth consumption over time. ...
D Dacy… - Economic Inquiry, 2011 - Wiley Online Library
... 9 We do not reject the Eulerequation when we substitute the net real rate of ... 10. A. Previous Studies,
Models, Time Periods, Consumption Data and Findings. ... 4 gives the results of some of the estimates
of relative risk aversion and intertemporalelasticityofsubstitution from some ...
... model parameters, such as the intertemporalelasticityofsubstitution. ... We also estimate the elasticity of debt to interest rates, which is of independent interest. ... (See also Parker 1999.)
Ludvigson [1999] relates changes in aggregate consumption to changes in aggregate ...
T Jappelli… - World Bank Research Project: Taxation of Financial …, 2002 - csef.it
... the intertemporalelasticityofsubstitution; analysis of specific tax reforms. ...intertemporal substitution in consumption. Since Hall's (1978) seminal contribution, the ...elasticity makes it
more likely that the substitution effect dominates the income effect, the Euler...
... Separating risk aversion and intertemporalsubstitution 1256 4. The dynamics of asset returns
and consumption 1260 4.1. ... documented a host of interesting stylized facts about the stock market
and its relation to short-term interest rates and aggregate consumption: (1) The ...
GD Otto… - Journal of Monetary Economics, 1998 - wwwdocs.fce.unsw.edu.au
... The subjective discount factor, the intertemporal rate of substitution and the depreciation rates ...
To obtain an accurate estimate of the intertemporalelasticityofsubstitution is likely to require
a ... a first- order moving average structure into the error terms of consumption-based Euler...
...substitution and asset returns in the UK data. They conclude that the predictions of the ... the value
of elasticityofintertemporalsubstitution is partially due to ignoring household ... statistically significant
parameter estimates when consumption measures are calculated ...
M Ito… - Applied Financial Economics, 2010 - Taylor & Francis
... Measuring the intertemporalelasticityofsubstitution for consumption: some evidence from Japan. ...
Finally, when we substitute the estimates that our reliability measure suggests are the best, the
EL estimates, into the formula of Kandel and Stambaugh (199118. ...
... the inverse of the elasticityofintertemporalsubstitution (EIS), could resolve the puzzle of low
real interest rates simultaneously with a high equity premium (the “risk-free rate ... therefore equal
to the intertemporal marginal rate of substitution (MRS) in consumption. ...
... ( 15.1 ' #/) and $t'1 is iid and uncorrelated with any variable known at t. Equation (2) shows
that the coefficient on the interest rate term in a consumption growth equation should,
in principle, give an estimate of the intertemporalelasticityof...
... The horizontal axis in the figure shows the intertemporalelasticityofsubstitution ψ, while the
vertical ... of its myopic nature, this component does not depend on ψ, the elasticityofintertemporal substitution. ... A0/(1 − ψ) and −A1/(1 − ψ) are independent of the intertemporal elas- ticity ...
NL Stokey - Journal of Economic Theory, 2009 - Elsevier
... on the elasticity of substitution between housing and nondurables and on the elasticityof intertemporalsubstitution. ... and nondurables, or higher risk tolerance (a higher intertemporal elas-
ticity). ... Appendix A The estimate of the intratemporal substitutionelasticity uses the simple ...
O Bandiera, G Caprio, P Honohan… - Review of Economics …, 2000 - MIT Press
... and Fry (1995) conclude that more studies have found a positive interestelasticity of saving ... income
might reflect the inability of households to smooth the intertemporal pattern of ... the substitution
effect dominates the income effect), but more predictably reducing disintermediation ...
M Stephens Jr - The Review of Economics and Statistics, 2008 - MIT Press
... repaid. If the interest rate falls when the household repays the loan, then
the household may rationally increase consumption at this time since the intertemporal price of consumption has decreased. While ...
... For the private agent's intertemporal optimal choice of consumption, the marginal rate of substitution for the con- ... conditions relating to the intertemporal choice of consumption. Hence
the ... a lower income elasticity than goods Z (aZ > a=), then the stationarity of ...
E Cardia, N Kozhaya… - 1999 - papyrus.bib.umontreal.ca
... specifications imply that the marginal disutility of work is constant, the intertemporalelasticity ofsubstitution is infinity ... Notice, however, that the intertemporal effects of movements in the tax
rate and ... in table 2. Recall that (15) includes both taxation and partial substitution of public ...
... Therefore, distinguishing between intertemporalsubstitution and risk aversion does not affect
the estimates of the costs of fluctuations. Moreover, the intertemporalelasticityofsubstitution... of
the elasticityofintertemporalsubstitution affected the value attributed to the return on ...
S Kandel… - Journal of Monetary Economics, 1991 - Elsevier
... When future utility is deterministic, then is the rate of time preference and 77 is the elasticityof intertemporalsubstitution. ... This role of intertemporalsubstitution in the relation between interest
rates and expected consumption growth is well known [eg, Hall (1988)] and, in ...
CH Huang - International Review of Economics & Finance, 2010 - Elsevier
... in the real interest rate will induce a rise in the current account through intertemporalsubstitution
effect, which is measured by the elasticityofintertemporalsubstitution σ. ... of the possible effects
of the terms-of-trade and the real interest rate on the consumption change, our ...
... We study how long-run risk depends on intertemporalsubstitution, on risk aversion and on ... In
addition to our substantive interest in such risk, there is a second and ... led Daniel and Marshall
(1997) to use an alternative frequency decomposition of the consumptionEulerequation. ...
R Blanco… - Banco de España Research Paper No. WP- …, 2007 - papers.ssrn.com
... the positive effect of consumption growth on the marginal rate of substitution. ... rate falls in the second
sub-period for high values of the elasticityofintertemporalsubstitution. ... as preferences, technology
and the ability of agents to design intertemporalconsumption and investment ...
... services, c; it is the intertemporalelasticityofsubstitution and the reciprocal of the coefficient
of relative risk aversion. ... with higher government purchases are low values of intertemporal substitution, σ, and high values of the elasticity of labor supply, ψ. ...
... value of risk aversion parameter γ is well above 1 and the values of inverse of the intertemporal elasticityofsubstitution (IES) 1/ψ is negative but larger than 1− ...intertemporalsubstitution. ... analytical
solution for the pricing kernel and only consider the intertemporalelasticity...
... The intertemporalelasticityofsubstitution is given by 1/ γi, the inverse of risk aversion. ...consumption
growth should increase with higher real interest rates and decrease with higher ... without the
assumption of log-normally distributed consumption growth rates from a 2 nd order ...
... some of the estimates. Our application is to the intertemporal, consumptionEulerequation that
links nom- 1 Page 3. ... Researchers most often use the median forecast, here denoted Ejtπt+1,
and substitute it in the theory ... forecasts of inflation and consumption growth. ...
Y Wu - Review of International Economics, 2008 - Wiley Online Library
... is the intertemporal discount factor, with 0 < β < 1, and σ > 0 is the elasticityofintertemporal substitution. ... be viewed as an extreme benchmark, with the assumption of no intertemporal
smoothing in ... Figure 1. Krugman's 45-Degree Rule, Whole Sample, DOLS ElasticityEstimates. ...
E Hurst - University of Chicago Graduate School of …, 1999 - faculty.chicagobooth.edu
... preference parameters relating to risk tolerance, time preference, and intertemporalsubstitution
for households ... ωi 2 /2 + b0 + b1), where γk is the intertemporalelasticityofsubstitution (1/ρk ... To
test whether household consumption responds to predictable changes in income, the ...
F Gardes, P Merrigan - Journal of Economic Behavior & Organization, 2008 - Elsevier
... estimated parameters of the minimum income equation to parameters of risk aversion or to the intertemporalelasticityofsubstitution. ... The supplementary consumption is evaluated according
to its cost ... 6 −Y(∂ 2 V/∂Y 2 )/(∂V/∂Y) = 1 − β, and the IntertemporalSubstitution Rate σ ...
M Lettau… - Review of Economic Dynamics, 2009 - Elsevier
... by using the wrong functional form for the marginal rate of substitution in consumption... to aggregate consumption, C t , (1 )/(1 1/ ), is the intertemporalelasticityofsubstitution in consumption...estimate
high values of risk aversion when fitting the standard consumption-based model ...
... rates. This extension is of particular interest as allows one to estimate the elasticityof intertemporalsubstitution. ... 7 Or martingale, to be precise. Page 13. 12 consumption (and
other variables)8. If we consider an asset whose rate of return is the same ...
O Attanasio… - by S. Adam, T. Besley, R. Blundell, S. Bond, R …, 2010 - ifs.org.uk
... the relative price of consumption at different points in time, and the ElasticityofIntertemporal Substitution (EIS) plays ... One such assumption is that of inter-temporal separability, which implies ...
reinforce substitution effects and also lead to a decrease in consumption or increase in ...
MS Habibullah… - Applied Economics Letters, 1999 - Taylor & Francis
...regression results for Equations 3 and 4 respectively.8 Our main interest is to determine whether
the proxies for finan- cial liberalization are signifi cantly different from zero ... Patterson, KD and
Pesaran, B. (1992) The intertemporalelasticityofsubstitution in consumption in the ...
... models of the Eulerequation type and traditional solved-out consumption function. ... Variables
included in the model are real growth in net wealth, share prices, consumption expenditures,
inflation, the real interest rate and the rate of unemployment. ...
... View the MathML source The parameter ρ is the reciprocal of the elasticityofintertemporal substitution. ...Intertemporalsubstitution is now determined by more than just ρ: in particular the ...
real interest rates, but used a specification with quadratic adjustment costs in consumption. ...
... smoothness is related to the violation of the intertemporal budget constraint with a single asset
and ... the innovation to income and consumption at the business cycle frequency. To remove
deterministic changes, therefore, we regress the variables of interest on a cohort ...
P Arestis… - Eastern Economic Journal, 2008 - palgrave-journals.com
... That is, the IS or preference shocks are determined by consumptioninterest rates and prices. ...
In particular, they are functions of the degree of habit formation in consumption (h), the intertemporalelasticityofsubstitution (σ), the discount factor (β), and the AR coefficient of the ...
R Riley… - … PAPERS-NATIONAL INSTITUTE OF ECONOMIC AND …, 2003 - Citeseer
... 2 The discount rate is assumed to equal the rate of interest so that the intertemporalelasticity ofsubstitution does not enter into the calculations. ... Unless the elasticity of substitution is large
per capita consumption of food should be expected to increase with size. ...
K Hong - International Economic Journal, 2003 - Taylor & Francis
... Ogaki and Reinhart (1998) show that, when the intratemporal substitution effect is sufficiently ...
non-separable in durables and non-durables, the estimator of the intertemporalelasticityof substitution that is ... the standard PIH is rejected as a model for durables consumption and the ...
... (4) where t c is the natural logarithm of consumption, t C ; the real rate, rt , is now time-varying;
and the parameter y > 0 represents the intertemporalelasticityofsubstitution in private spending,
alias, in this simple case, the real interestelasticity of consumption. ...
... The conditions characterizing the allocation of do- mestic and foreign consumption and holding
of nominal ... (5) In the equations, b is the intertemporal discount fac- tor; f(.) depends on the real ...
rate differential to changes in the NFA position.11 The higher the elasticity, the larger ...
T Besley… - unpublished typescript prepared …, 1998 - siteresources.worldbank.org
... and where 7 ^ 1/a is the elasticityofintertemporalsubstitution and β is the personal discount ... the interest rate on savings still depends on the sign of the intertemporalelasticityofsubstitution,
but its ... low net worth individuals are also likely to have lower intertemporal elasticities of ...
... Savina. and Conumotion The impact of a change in the interest rate on saving is ambiguous.
The substitution effect induces investors to save more in response to a ... and thus depress current consumption - - tends to imply a positive saving elasticity Yet the empirical...
JE BOSCÁ, A CUTANDA… - investigaciones …, 2006 - redalyc.uaemex.mx
... 9. Campbell and Mankiw (1991) obtain an estimate of the elasticityofintertemporal. substitution
that is as often positive as negative and it is never statistically sig-. nificant. ... elasticities and of
the coe!cient related to the intertemporalelasticity. ofsubstitution. ...
MB Devereux, GW Smith… - Journal of International Economics, 2011 - Elsevier
... says that the ex-post ratio of intertemporal marginal rates of substitution should equal ... we
have:(3) ∀ i, j = 1, …, N, where γ is the common elasticityofintertemporalsubstitution. ... Since consumption and real exchange rates are determined simultaneously in almost any theoretical ...
JE Boscá, A Cutanda… - investigaciones económicas, 2006 - funep.es
... providing a generally accepted value for the elasticity of intertem- poral substitution. ... Campbell
and Mankiw (1991) obtain an estimate of the elasticityofintertemporalsubstitution that is ... two
output elasticities and of the coe!cient related to the intertemporalelasticityofsubstitution. ...
... is known as the intertemporal marginal rate of substitution, the pricing kernel, or the stochastic ...
relative risk aversion γ is equal to the elasticityofintertemporalsubstitution ψ. ... parameters of
nonlinear models and has been extensively used in the recent past in intertemporal...
A Börsch-Supan - 2005 - eprints.bib.uni-mannheim.de
... gross rate of time preference. The factor of proportionality between the difference
in interest and time preference rates and the relative change in consumption
is the intertemporalelasticityofsubstitution, σ. The larger ...
PR Lane… - Review of Economics and Statistics, 2004 - MIT Press
... low relative to its future value, this encourages present over future consumption, as the consumption-based real ... However, it also encourages substitution from traded to nontraded goods ...
The former effect dominates if the intertemporalelasticity of substitu- tion, , is greater that the ...
... policy inertia via std(it it 1). We find that the elasticityofintertemporalsubstitution (EIS) and ... can
also be associated with either a large elasticity of substitution, or a ... Economic Review, 17 34 [10]
Okubo, M., 2008, On the IntertemporalElasticityofSubstitution under Nonhomothetic ...
TH McCurdy… - The Review of Economic …, 1991 - restud.oxfordjournals.org
... With a specification of preferences allowing identification of separate parameters relating to risk
aversion and intertem- poral substitution, a unit elasticityofintertemporalsubstitution implies
myopic choice of consumption and savings while relative risk aversion of unity ...
R Blanco Escolar… - Revista de economía …, 2011 - dialnet.unirioja.es
... Parameter γ measures the intertemporalsubstitution attitudes of households and a is a parameter
that ... rate falls in the second sub-period for high values of the elasticityofintertemporalsubstitution. ...
and the ability of agents to design in- tertemporal consumption and investment ...
I Fujiwara - Japan and the World Economy, 2007 - Elsevier
... ω 2 becomes positive, only when utility is non-separable between consumption and real ... the Bank
of Japan resumed the de-facto zero nominal interest rate policy ... Transforming this into quarterly
bases with considering that the intertemporalelasticityofsubstitution is now set at ...
... than, equal to or less than the inverse of the marginal rate of intertemporalelasticityofsubstitution. ...
The intertemporal marginal rate of substitution, weighted by the nominal in- terest rate ...Equation
(5) determines the marginal rate of substitution between housing and consumption...
F Ghironi - Boston College Econ. Dept. WP, 2000 - paulaarnold.com
... 8 I restrict the intertemporalelasticityofsubstitution in utility from money holdings to equal the elasticity of substitution in ... The representative domestic consumer maximizes the intertemporal
utility function (1) subject to the constraints (2) and (3). Dropping the j superscript ...
K Aoki, J Proudman… - Federal Reserve Bank of New York …, 2002 - ny.frb.org
... deposit, they obtain less favourable interest rates when renegotiating their mortgage and have ...
Thus, the household faces a choice between current consumption and a cheaper ... payment—would
depend on such factors as the elasticityofintertemporalsubstitution, the sensitivity ...
...intertemporalelasticityofsubstitution (IES) and the subjective time preference of households.
It ... the intertemporal and precautionary motives for saving, ie it gives ¯Kim. ... where government consumption is assumed to be a perfect substitute for private consumption. ...
J Murray - Caepr Working Papers, 2008 - papers.ssrn.com
... lump sum taxes. The preference parameters are the intertemporalelasticityofsubstitution, ... θ ∈
(1,∞) is the elasticity of substitution in production. Profit maximization leads to the ... µ + 1 ) zt = 0.
One can solve this equation for zt and substitute it back into the equation for marginal ...
S Saksonovs - Darwin College Research Report, 2006 - darwin.cam.ac.uk
... for estimating (2.9) is the value of 1/σ interpreted as the intertemporalelasticityofsubstitution. ...
2000) find that the model performs best with low values of intertemporalelasticity of ... fit of the model
that do not depend on differing consumer preferences for intertemporalsubstitution. ...
... the reference level is then quite naturally ½ = 1 ¡ '; with the elasticityofintertemporalsubstitution
¾ = 1 ... natural disentangling between risk aversion and intertemporalsubstitution. ... Since, according
to the habit formation approach, the reference consumption level St is supposed ...
R Bansal, D Kiku, A Yaron - … Duke University and …, 2007 - savage.wharton.upenn.edu
... coefficient of risk aversion, θ = 1−γ 1− 1 ψ , and ψ is the elasticityofintertemporalsubstitution
(IES). ... Epstein, Larry G., and Stanley E. Zin, 1989, Substitution, risk aversion, and the intertemporal
behavior of consumption and asset returns: A theoretical framework, ...
... of the elasticityofintertemporalsubstitution between 0.158 and 0.351 and estimates
of relative risk aversion between 2.849 and 6.329. ... aversion, the discount rate and the elasticity of substitution by Issler and Piqueira (2000) using ...
J González Chapela - Working papers= Documentos de trabajo …, 2007 - dialnet.unirioja.es
... represent the elasticity at which C* is intertemporally substituted, the elasticityofintertemporal substitution of the whole recreation activity, and the elasticity of contemporaneous ... The population
parameters β1 and β2 are the elasticities of intertemporalsubstitution of market ...
...elasticity of money demand, the elasticityofintertemporalsubstitution is equal to 1 and the ... In
particular, Obstfeld and Rogoff (1996) point out that an intertemporal non-separable utility function
would yield ... z)/P = p*(z)/P* for any good z, we can determine the constant-elasticity-of- ...
CB Cavalcanti - Brazilian Review of Econometrics, 1993 - bibliotecadigital.fgv.br
... relevant in the case of financed government spending, as intertemporalsubstitution in consumption... for the liquidity constrained consumers, and even in this case the intertemporal elasticityofsubstitution is less ... of an increase in real interest rates outweighs the substitution effect ...
... The parameter 0 <β< 1 is the subjective discount factor, γ is the relative risk aversion, ψ
is the elasticityofintertemporalsubstitution (EIS). This ... 1, (5) which implies that the intertemporal marginal rate of substitution (IMRS) is Mt+1 = βθ(Ct+1 Ct ...
RJ Balvers… - Journal of International Money and Finance, 2002 - Elsevier
... results from estimating these equilibrium conditions and finds plausible estimates of the elasticity ofintertemporalsubstitution (approximately one ... utility function in a “separable way,” implying
that the marginal rate of intertemporalsubstitution in private consumption “does not ...
K Sill - Canadian Journal of Economics, 1998 - JSTOR
... where 1/'} is the intertemporalelasticityofsubstitution and the share parameter at is a function
of time ... of substitution of cash for credit goods at time t. Rather, it affects substitution intertemporally ...
applied to Eulerequations (5) and (6), which fully capture the intertemporal trade-offs ...
R Perotti - The Quarterly Journal of Economics, 1999 - qje.oxfordjournals.org
... as- suming for simplicity that both the rate of time preference and the interest rate are ... However,
the expected PDV of taxation also increases by (1 + 00 ) by the intertemporal govern- ment ... in
expenditure and taxation should have no effect on the change in consumption once the ...
G Bekaert, RJ Hodrick… - Journal of Monetary Economics, 1997 - Elsevier
... It is of interest, then, to consider a class of (nonexpectedutility) preferences that ... correspond to
the elasticity of substitution between current and future consumption (as studied ... The more
conventional notion of intertemporalsubstitutionelasticity is a function of all the preference ...
K Kim, VB Hall… - Journal of International Money and Finance, 2006 - Elsevier
... VAR in first order form.) Making use of View the MathML source and substitution into Eq ... σ is the intertemporalelasticityofsubstitution and α is the share of traded goods in total consumption
expenditure ... C=C T +PC NT , and View the MathML source is the consumption based real ...
J Boivin… - Federal Reserve Bank of New York Economic …, 2002 - Citeseer
... In this case, the parameter ¾ is associated with the elasticityofintertemporalsubstitution in consumption. For simplicity, we assume that the central bank conducts monetary policy by
setting the short-term real interest rate. This is clearly a simplification. ...
... specified utility function is estimated with the additional straitjacket of invertible relationship
between RA and elasticityofintertemporalsubstitution (EIS). ... random components of the intertemporal decision problem building on Koopmans (1960) for ...substitution parameter. ...
... Implicit in the utility function (4) is a constant elasticity of substitution (CES) time aggregator and
CES ... Epstein-Zin preferences provide a separation of the elasticityofintertemporalsubstitution...
Intuitively, the EIS measures the agents willingness to postpone consumption over ...
... which describe rate of time preferences, σ is the inverse of the elasticityofintertemporal substitution in consumption... parameter, 0 ε > is the elasticity of intratemporal substitution among
goods produced to be same in ... tt t t PW Ξ = , Therefore, intertemporalconsumption choice is ...
M Obstfeld… - Handbook of international economics, 1995 - Elsevier
... 1/'~ - 1 u(C) - 1 - 1/o" with o- > 0 the elasticityofintertemporalsubstitution, In this ... importance of
the transfer effect in policy discussions, the development of empiricalintertemporal models that ...
country good M. Moreover, assume that in both countries p, the elasticity of substitution...
... coefficient (RRA) or the elasticityofintertemporalsubstitution for consumption (EIS) was near ...
7 Lucas (1990) pointed out that to understand the cross-country differences in interest rates and ...
the consumption and the household net worth data in Lettau and Ludvigson (2004), the ...
PA Chiappori… - DES, University of Naples, Discussion …, 2008 - sie.univpm.it
... parameters, portfolio composition only de- pends on risk aversion and not on the intertemporal elasticityofsubstitution, ... which focus on the relationship between the rate of growth of consumption
and real ... the coefficient on log Wh,t would measure the average elasticity of risky ...
C Olovsson - International Economic Review, 2009 - Wiley Online Library
... GDP/Capita, 1, 1.31. The intertemporalelasticityofsubstitution for consumption is set to 0.5, which
implies γ= 2. 33 Parameter μ determines the intertemporal (Frisch) elasticity... 35 Since estimates
for women are generally higher, I set μ to 5, implying a Frisch elasticity around 0.48 ...
HL Han… - International Review of Economics & Finance, 1997 - Elsevier
... presented a version of the permanent income hypothesis (PIH) with a constant intertemporal elasticityofsubstitution Direct all ... (1991) considered consumption, income and interest rate in ... TF
Cooley and M. Ogaki , A time series analysis of real wages, consumption and asset ...
CA Favero, I Kaminska, U Söderström… - 2005 - papers.ssrn.com
... determined by an intertemporalEulerequation (see, for example, Woodford (2003)), ... short rates
to substitute for ex-ante expected rates, while Ang et al. (2004) use a ... 19 X j=0E£i1 t+j \ It¤ + TPt,
(2) where i20 t is the five-year interest rate, i1 t is the three-month interest rate, It is ...
DK Backus, F Gavazzoni, C Telmer… - 2010 - nber.org
... The marginal rate of intertemporalsubstitution, defined as nt+1, is ... (15) The nominal marginal
rate of substitution — the pricing kernel for claims denom- inated in USD units — is then ... Without
policy shocks endogenous inflation will depend only on consumption shocks. ...
J Fernandez-Villaverde… - Proceedings of the 2002 …, 2002 - Cambridge Univ Press
... often with a focus on quantifying key structural parameters, especially the elasticity of substitution...
durables (and no accumulation of financial assets) early in life and substitution toward higher ... intertemporal trade by endogenous borrowing constraints, as explained below in detail ...
... Page 15. -12- - grounds, however, the impact on saving cannot be determined, because the substitution effect entailed by the decline in interest rates increases the cost of postponing consumption. This tends to offset to some degree the income effect. ...
GJ Müller - Journal of International Money and Finance, 2008 - Elsevier
... If the elasticityofintertemporalsubstitution is high relative to the elasticity of intratemporal substitution, net exports ... ɛ > 0 provides a measure for the intratemporal elasticity of substitution
between the ... Let μ > 1 denotes the price elasticity of demand for differentiated output goods. ...
... In a certainty environment, the elasticityofintertemporalsubstitution that describes the percentage
change in ... predictions of the monetary approach only when the intertemporalelasticityof substitution is high ... The results are reversed if intertemporalsubstitution is low (7 > 1 and S ...
R Bansal… - unpublished paper, Duke …, 2007 - finance.sauder.ubc.ca
... an intertemporalelasticityofsubstitution near one. 9 Page 12. ... In this case the intertemporal substitution effect dominates the wealth effect. In response to higher expected growth, agents
buy more assets, and consequently the wealth to consumption ratio rises. ...
M Mazzocco - Review of Economic Studies, 2007 - Wiley Online Library
... Proposition 5The private household Eulerequations for the no-commitment inter-temporal
collective model can ... Suppose also that the correct model of household intertemporal behaviour
is the full ... quarters, for each household in each quarter, I use only the consumption data for ...
JE Boscá, A Cutanda… - 2000 - www-sre.wu-wien.ac.at
... with σ#1. Notice that 1/(1-σ) is the intertemporalelasticityofsubstitution and 1-σ the ... the intertemporal marginal rate of substitution for a representative consumer, which is a ... 20 The
estimation of the elasticityofintertemporalsubstitution is not the aim of this work, especially when ...
ZG Wang… - Review of Finance, 2010 - rof.oxfordjournals.org
... model with the magnitudes of risk aversion and elasticityofintertemporalsubstitution being 4 ...
discount factor, the risk aversion coefficient and the intertemporalelasticityofsubstitution (IES),
respectively. ... is often called the “Intertemporal Marginal Rate of Substitution” (IMRS) or ...
EM de la Cruz, AR Martinez-Canete… - Applied …, 2007 - Taylor & Francis
... In this article, we have focused our attention on the elasticityofintertemporalsubstitution, one
of ... Intratemporal Elasticity of Substitution in Germany, Spain and France. ... Estimation of intertemporal elasticityofsubstitution by the GMM method also requires the series employed to be ...
... intratemporal substitution between tradables and nontradables consumption is smaller than the intertemporalelasticityofsubstitution. ... For instance, if 7 = 0 (infi- nite elasticityofintertemporal substitution) it is immediate ... from 0 to 3), holding the intratem- poral elasticity constant at ...
... to the new steady-state, depending on the intertemporalelasticityofsubstitution. ... However, it is
the elasticityofintertemporalsubstitution in consumption that explains the time paths of ... with
constant intertemporalsubstitution) investment will be high and the transition to the new ...
A Semenov - International Journal of Finance & Economics, 2008 - Wiley Online Library
... in the cross-section, PNt i¼1 witšjŽdšCi;tž1=CitŽĄg is identical to the cross-sectional expectation
of the intertemporal marginal rate of substitution, Ei½dšCi;tž1 ... argued that the decisions to acquire
assets are likely to be endogenous with respect to the consumption decisions. ...
... "- 1 " ! (7) where σ is the elasticityofintertemporalsubstitution (IES) as well as the inverse of the
coeffi % ... The increase in θ" shifts the marginal rate of substitution as in the closed ... Section 4.1,
for the mechanism to work there is a trade%off between the intertemporalelasticity...
M Salm - Canadian Journal of Economics/Revue canadienne …, 2010 - Wiley Online Library
... The intertemporalelasticityofsubstitution is given by 1/γ, the inverse of risk aversion. ... t. Equation
(6) postulates that expected consumption growth should increase with higher real interest rates
and ... ĥ i,t is included in regressionequation (7) as a proxy for overall consumption risk ...
M Beine, F Bismans, F Docquier… - Journal of policy modeling, 2001 - Elsevier
... rather than from calibration ones, our estimate for the intratemporal elasticity of substitution (0.942)
is ... The intertemporalelasticityofsubstitution is rather low. ... On the goods market, the relative
weakness of the elasticityofintertemporalsubstitution (combined with the durability of ...
...consumption (and saving) decisions are taken as a part of an intertemporal decision process. ...
I will consider, they have in common the hypothesis that consumption decisions are ... for their
assumptions about optimisation horizon, uncertainty, curvature of the Interest readers can ...
M Browning, LP Hansen… - Handbook of macroeconomics, 1999 - Elsevier
... a is irrelevant in an environment without uncertainty, but the intertemporalelasticityofsubstitution ( -
l / p ... heterogeneity in discount rates and intertemporal elasticities of substitution, the efficient ... of
relative risk aversion without linking it to the elasticityofintertemporalsubstitution. ...
G Bertola, L Guiso… - Review of Economic Studies, 2005 - Wiley Online Library
... The marginal rate of substitution only depends on the ratio of the ... is not only intratemporally
homothetic, but also displays unitary intertemporalelasticityofsubstitution, then the ... source of
uncertainty, preferences are homothetic with unitary intertemporalelasticity, and adjustment ...
...ofintertemporalsubstitution. ... HP-filtered real exchange rate relative to HP-filtered output if the
coefficient of intertemporal... t > 1 denote the elasticity of substitution at time t between the
differentiated goods produced in the home country and foreign country, respectively. ...
M Browning… - The Review of Economics and Statistics, 2009 - MIT Press
... first formal incorporation of demographics in micro-estimation of inter- temporalconsumption
relationships is ... 3 This intertemporalsubstitution explanation argument is closely related to the ...
in disrepute as a vehicle for estimating the elasticityofintertemporalsubstitution (see, for ...
GW Smith… - … of Economics, Queen's University, Working Paper, 2007 - sef.hku.hk
... gross returns on assets to an intertemporal, marginal rate of substitution (IMRS), this ... Researchers
most often use the median forecast, here denoted Ejtπt+1, and substitute it in the theory ... from
quarter to quarter, do not align completely with those of inflation and consumption- ...
A İmrohoroglu, S Imrohoroglu… - Economic Theory, 1995 - Springer
... There seems to be a wide range of empiricalestimates for the intertemporalelasticityof substitution, 1/7. Hurd's (1989) estimates are 1.4 and ... For example, Hall (1988) uses annual data
on consumption and estimates negative values for the intertemporalelasticity of ...substitution. ...
... 2.2 Elasticityofintertemporalsubstitution... and Attanasio (2003) use a similar method- ology, they
find that accounting for taxes yields elasticityestimates between 1.03 ... 12 Notice that if noise traders
were to incorporate intertemporal hedging into their portfolio rule, the riskfree ...
A Flores‐Lagunes - Journal of Applied Econometrics, 2007 - Wiley Online Library
... In a recent paper, Yogo (2004) analyzes the problem of estimating the elasticityofintertemporal substitution (EIS) using the linearized ... the following instruments are used when employing IV
methods: the twice-lagged nominal interest rate, inflation, consumption growth, and ...
SI Nishiyama - … , Institute for Monetary and Economic Studies …, 2002 - nishiyama2001jp.com
... this addi-log specification, 1/α and 1/γ can be interpreted as the intertemporalelasticityof substitution (IES) of Nt ... the cross intertemporal marginal rate of substitution (CIMRS) between
goods xi ... where the agent is trading Nt to Lt+1. Now the marginal rate of substitution between Lt ...
C Koulovatianos… - University of Cyprus Working …, 2004 - papers.ssrn.com
... equilibrium conditions of this setup, their findings should uncover similar estimates for the intra-
and inter-temporal elasticities of ... do not gain extra utility from “consumption smoothing” if their elasticityofintertemporalsubstitution is unitary and production technology is linear. ...
...elasticity of substitution between the two consumption goods. Implicit in this specification ... stock.
We therefore use the words “stock” and “consumption” interchangeably in reference ... is its elasticity ofintertemporalsubstitution, and γ > 0 is its relative risk aversion. We define ...
A Börsch-Supan - Ricerche Economiche, 1995 - Elsevier
... This results in an elasticityofintertemporalsubstitution in consumption Q = 06749, and implies
a ... is in line with the estimated low intertemporalelasticityofsubstitution in consumption... path of consumption as impatience decreases, making intertemporalsubstitution more important ...
... It suffices to assume very low elasticities of intertemporalsubstitution (EIS), which might ... Now,
suppose that preferences take the constant elasticityofintertemporalsubstitution (CES) form,
u ... In particular, I find that the intertemporalelasticityofsubstitution is an underappreci- ated ...
DG Swaine - Working Papers, 2008 - college.holycross.edu
... 1 c )c(u 1 t t : a CIES (Constant IntertemporalElasticityofSubstitution) function. ... of growth of
Harrod-neutral technical change; θ being the coefficient of relative risk aversion, which is the
inverse of the Intertemporalsubstitutionelasticity; α being the output elasticity of capital ...
... The first property is risk aversion and intertemporalsubstitution in consumption. With
additively separable preferences across states and time periods, the coefficient of
relative risk aversion (CRRA) and the intertemporalelasticity...
... supply: (1— a )"1 and (B — 1)-1 represent the elasticityofintertemporalsubstitution in Consumption... restriction placed on the Japanese quarterly data series of aggregate consumption
of worker ... the taste parameter of workers in labor supply) and 0' (the substitution rate between ...
... tion is a substitute for leisure in enjoyment, increasing enjoyable consumption may be the ... We
can proceed to solve for the consumption trajectory either analytically or numerically if we ... where
σ is both the inverse of the elasticityofintertemporalsubstitution and the coefficient of ...
H Tam… - Journal of International Financial Markets, Institutions …, 2009 - Elsevier
... of that of Hansen and Singleton (1983), finds that the estimated elasticityofintertemporal substitution (EIS), which ... 2 in the first-stage regressions, since both stock market return and consumption growth are ... More recently, there is resurgence in the interest of the problem of weak ...
... shocks are denoted by #t . The parameter, ), is the inverse of the intertemporalelasticityof substitution while $ is the inverse of the Frisch labour supply parameter. ...elastic labour supply. ...
the size of the so-called intertemporalsubstitution effect relative to the precautionary savings ...
REA Farmer - Journal of Money, Credit, and Banking, 1997 - JSTOR
... in much of the literature that this parameter should be in the range of 1 to 4. The parameter A
is the elasticity of substitution in each ... I mean the marginal utility of money evaluated at the steady
state and by the indirect effect I mean the cross partial of money with consumption. ...
... income one, which means that the elasticityofintertemporalsubstitution must be greater ... 3 Page
5. of aggregate consumption growth by an agent with elasticity of substitution greater than ... The
preference parameter ψ measures the intertemporalelasticityofsubstitution, γ ...
... The resulting intertemporal rate of substitution is mt"$ ) β $ Ct"$ Ct %-η (11) ... Ut ) 6!% β"C
p t # ΕtUa t"$ " 7! " (14) where %/!% ρ" is the intertemporalelasticityofsubstitution in consumption and a ) %7 determines the agentqs behavior towards risk. ...
V De Bonis… - Public Finance Review, 1999 - pfr.sagepub.com
... negative from a theoretical perspective and in analyzing the role of the substitution and wealth ...
to the information set available at time t. In specifying the intertemporalconsumption choice
between ...Consumption is in real terms, and the quar- terly series is seasonally adjusted, in ...
... In this case the elasticityofintertemporalsubstitution is not constant. 5 See, for instance,
Hall (1988). ... The problem becomes even more serious if the elasticity of substitution is
not constant but a ﬁlnction of various demographic variables. ...
T Ho - Journal of Economic Development, 2001 - jed.or.kr
... in productivity raises the real wage sufficiently that there is a substitution away from ... t t Cr CE σ
β + = + where σ = U'(C*)/{C*⋅U”(C*)} is the intertemporalelasticityofsubstitution. ... is found for
the null that total government consumption does not Granger cause private consumption. ...
... from an additional unit of consumption. Thus, the elasticityofintertemporalsubstitution substitution between dates t+1 and t consumption decreases and a higher expected stock
return is needed to satisfy the Eulerequation for optimal consumption. ...
... where 0 1 < β < is the subjective rate of time discount, σ > 0 the elasticityofintertemporal substitution, and ε and 1 1 1 1 1 T N C C (1 ) C θ θ− θ− θ− θ θ θ θ ⎡ = γ + − γ ⎢ ⎥ ⎣ ⎦ ⎤ 2) d ... The
third term Nt ( /2)y − κ captures the isutility of wor rt, in this case, with an elasticity put of 2 2 ...
F Panetta… - Bank of Italy Temi di Discussione (Working …, 1999 - papers.ssrn.com
... to be equal to the reciprocal of the elasticityofintertemporalsubstitution; it is a highly ... reciprocal
of the intertemporalsubstitutionelasticity. Furthermore, if γ=σ =1 (substitutionelasticity and risk
aversion both equal to one), we have the special case of logarithmic utility. ...
... The consumption growth rate is higher the higher the real interest rate and the higher the intertemporalelasticityofsubstitution is. If the real interest... associated with intertemporal
optimization, and the permanent-income hypothesis can no ... private consumption.16 ...
... in Weil (1989), their results show that a smaller elasticityofintertemporalsubstitution generates
a ... model the product of the relative risk aversion and intertemporalelasticityofsubstitution is
substantially ... be written as the product of utility curvature and the elasticity of consumption...
... over time given the discounted expected price ratio of domestic non-durable consumption goods
at ... way to interpret this equation is to regard intertemporal marginal rate of substitution (IMRS)
as a ... 1/a and l/u can be interpreted as the intertemporalelasticityofsubstitution (IES) of ...
... where rt is the riskless interest rate ... in detail a special case for which their solution is exact, namely
the case where the investor has unit elasticityofintertemporalsubstitution. ... special case is much
less rich than the one considered here because the ratio of consumption to wealth ...
... factor, the intertemporalelasticityofsubstitution, and the share of traded goods in consumption,
respectively. ... via the consumption function,” Journal of International Money and Finance ... Sheffrin,
SM, Woo, WT, “Present value tests of an intertemporal model of the ...
C Papageorgiou… - … papers= Documentos de …, 2001 - dialnet.unirioja.es
... formed. Human capital technology is of particular interest in our model and deserves careful ...
(13) L0; S0; K0; A0 given, where µ is the inverse of the intertemporalelasticityofsubstitution;
½ is the discount factor; and ... must equal consumption plus physical capital investment, It. ...
... 5Note that, when demand is infinitely elastic, this wedge is eliminated - this specification
characterizes the perfect competition case. 5 Page 8. ... In this environment the intertemporal
marginal rate of substitution (in nominal terms) is equalized across countries. ...
... domestic and foreign interest rates, and two underlying parameters: the preference for foreign
currency and the elasticity of substitution between the two currencies. The transmission ... is the
price of this bond) we can derive the intertemporalEulerequation (14) ...
M Obstfeld - The economics of saving and growth: theory, …, 1999 - books.google.com
... u (c)= G, 1-(1/0) where o> 0 is the intertemporalsubstitutionelasticity, and that ... Saving, and Growth
125 It can be shown that, along SS, consumption and the ... A critical determinant of llfl is o, the elasticityofintertemporalsubstitution, which, loosely speaking, measures consumers ...
... shows that a higher intertemporalelasticityofsubstitution is associated with greater financial literacy
and higher saving levels. ... 6The intertemporal rate of substitution, σ, is chosen to be broadly
consistent with the evidence in Attanasio and Weber (1993) and (1995). ...
... premium. In contrast, I estimate a high elasticity of substitution between the goods, ... tence of durable consumption growth. In Section 1.8, I show that this “riskfree rate 5 Page 21. puzzle” can be
resolved by separating risk aversion from the elasticityofintertemporal...
...substitution with its theoretical representation based on consumption growth and the return to
aggregate wealth. ... Using quarterly data on consumption growth, assets returns and instruments,
our empir- ... The estimated elasticityofintertemporalsubstitution is above ...
... where θ = 1-γ 1- 1 ψ , γ ≥ 0 denotes the risk aversion coefficient and ψ ≥ 0 the elasticityof intertemporalsubstitution (EIS). The discount factor is denoted δ. ... Epstein and Zin (1989) show
that the logarithm of the intertemporal marginal rate of substitution (IMRS) is given by: ...
JH Stock, J Wright… - Journal of Business and …, 2002 - faculty.washington.edu
... estimator, which obtains after a few lines of algebra. First substitute the expression for Y ... (11) where
γ is the coefficient of risk aversion (here, also the inverse of the intertemporalelasticityof substitution), ∆ct+1 is the growth rate of consumption, rt is the log gross ...
... The intertemporalelasticityofsubstitution for unconstrained consumers is calibrated at 0.5, having
in mind estimates... is CES, as noted above, and estimates of the elasticity of substitution... In contrast
MULTIMOD and QUEST adopt the model of intertemporal optimization by firms ...
... Utility from consumption is assumed to be a constant relative risk aversion or constant intertemporalelasticityofsubstitution function: ... property of this function is that the elasticity
of substitution in consumption between any two points in time is 1 ± : ...
...intertemporal decisions. ... Ausubel (1991) reports credit card interest rates that are similar to our estimates before we correct for personal bankruptcy. ... puzzling, since endogenous labor supply
could be used instead of credit card borrowing to smooth consumption during transitory ...
... On the other hand its reciprocal will also determine the elasticityofintertemporalsubstitution. ...
8 If we would consider an alternative distribution of consumption and interest rate, then the
constant would possibly include higher moments of the distribution. Page 12. 12 ...
... inverse of the CRRA parameter a (the intertemporalelasticityofsubstitution in this framework ...
the time-separable utility function we use where high RRA parameters imply low intertemporal elasticity. ... an asymmetry in the errors (consumption is not symmetric) that casts doubt that ...
RJ Hodrick, DTC Ng… - International Tax and Public …, 1999 - Springer
... 1989) with separate parameters for the coefficient of relative risk aversion, γ, and for the elasticity ofintertemporalsubstitution, σ. ... realistic environment of conditional heteroskedasticity.5 The most
straightforward approach is to assume that the elasticity of substitution, σ, equals ...
... income one, which means that the elasticityofintertemporalsubstitution must be greater ... 3 Page
5. of aggregate consumption growth by an agent with elasticity of substitution greater than ... The
preference parameter ψ measures the intertemporalelasticityofsubstitution, γ ...
... magnitude of the elasticityofintertemporalsubstitution. Thirdly, it generates a time variation in
average returns on assets. ... is completely missing in the one good economy and hence the estimate
of the intertemporalsubstitution is biased downward. ...elasticity of substitution. ...
EM Engen… - Journal of monetary Economics, 2001 - Elsevier
... denotes the relative risk aversion coefficient (γ>0) and the intertemporalelasticityofsubstitution
for consumption... before consuming C t , is determined by the wealth transition equation (3)W ... and
income are determined as: with general taxes on consumption, interest income, and ...
B Carmichæl… - Journal of International Money and Finance, 2005 - Elsevier
... return on the market portfolio, influencing the intertemporal marginal rate of substitution. ... report
coefficients governing time preference, risk aversion and the elasticityofintertemporalsubstitution
of consumption. ... the (excess) return on the market portfolio and consumption growth. ...
R Chetty… - manuscript, Department of Economics, Harvard …, 2004 - nber.org
...consumption, as well as the elasticityofintertemporalsubstitution. In the following, we further
assume that γ = 1/ε, that is, the intertemporal and across-good elasticities of substitution are
equal. This simplification is necessary to make the model tractable. ...
C Papageorgiou… - Macroeconomic …, 2004 - Cambridge Univ Press
... for labor share in R&D, uAt : Equation (25) 3. Eulerequation for consumption, ˆct : Equation... US
observations.12 In turn, substituting the values of the steady-state interest rate, ρ ... and Gy,ss into equation (15) implies that the inverse of the intertemporalelasticityofsubstitution (θ) is ...
... To determine optimal consumption decisions, combine the intertemporal budget constraint 8 ... The
latter has only one part as the income and substitution effects of a wage increase both increase
current consumption. ... (8) where ǫH is the inverse Frisch elasticity of labor supply. ...
D Huffman… - Institute for the Study of Labor (IZA) Discussion …, 2005 - iza.org
... willingness to substituteconsumption between weeks: a 10 percent increase in prices in ... large
value for the intertemporalelasticityofsubstitution for exponential discounting to ... well below
accepted estimates, the model still requires an elasticityofintertemporalsubstitution of 23 ...
A Vissing-Jorgensen, CJ Malloy… - SSRN eLibrary, 2008 - papers.ssrn.com
... as non-stockholders have an EIS different from one, a general equilibrium model of limited stock
market participation also delivers a time-varying aggregate consumption-wealth ratio. B. Euler Equations for an ElasticityofIntertemporalSubstitution = 1 ...Eulerequation. ...
... The model's intra-and intertemporal optimizing equilibrium conditions are then derived. ... the consumption of nontradables, exportables, and importables.20 In the above specification,
tradables and nontradables are represented in constant- elasticity-of-substitution (CES) form ...
GM Angeletos - Review of Economic Dynamics, 2007 - Elsevier
... RBC model for heterogeneity instock-market participation and in intertemporalsubstitution
preferences. ... and output: a Hall-type regression based on aggregate consumption data generated ...
the coefficient of relative risk aversion, is the elasticityofintertemporalsubstitution, is the ...
... (2) The parameter γ is the inverse of the intertemporalelasticityofsubstitution for con-
sumption. The Frisch elasticity of labor supply is equal to 1/σ. The variable ϕt is a ... between
agents' willingness to substituteconsumption and hours intertemporally. ...
... where: θ is the instantaneous elasticityofintertemporalsubstitution. The consumer's problem
is to maximize a discounted infinite sum of the utility function in equation (1), ... no inter-temporal
interconnections. ...Substituteequations (1) and (4) representing the actual ...
JD Selaive, V Tuesta… - International Finance …, 2003 - papers.ssrn.com
... 1 σ Z 1 n c h t (f) σ−1 σ df# σ σ−1 , (4) where σ > 1 is the elasticity of substitution across
goods produced within a country. ... β is the intertemporal discount factor (0<β < 1). 11
This assumption implies inmobility of labors across sectors. ...
JY Campbell, S Giglio, C Polk… - 2011 - kuznets.fas.harvard.edu
... Finally, we substitute back into the intertemporal model (9 ... as well as the VAR parameters and
the loglinearization coeffi cient ρ, but it does not depend on the elasticityofintertemporal substitution φ except ... a consumption claim that satisfies the loglinearized Eulerequation exactly ...
... discounted at a rate exceeding the market rate of interest by a premium equalling the probability
of ... As in Campbell and Mankiw (1989), the approximate consumption function is obtained by solving
households' optimisation problem under the log-linearised intertemporal budget ...
KE Dynan, J Skinner… - Journal of Political Economy, 2004 - JSTOR
... words, adding back implicit Social Security saving “undoes” the substitution between private ...
households.11 Closely related are models in which the intertemporalelasticityofsubstitution
is larger for ... Our theoretical analysis focused on consumption and saving relative to lifetime ...
JI Peña… - Journal of Business Finance & …, 2007 - Wiley Online Library
... develop a class of nonexpected utility preferences that nest time, and state separable expected
utility preferences as a special case, but separates agent's relative risk aversion and elasticity ofintertemporalsubstitution parameters. ...Estimates for the elasticity of substitution (1/ρ ...
DC Smith - Journal of Econometrics, 1999 - papers.ssrn.com
... difference between the relative risk aversion parameter and the reciprocal of the intertemporal substitution parameter large. ...elasticityofintertemporalsubstitution parameters.1 ... process calibrated
to mimic the joint dependencies observed in aggregate consumption and dividend ...
KH Coble… - Journal of Risk and Uncertainty, 2010 - Springer
... Keywords Discounted expected utility . Kreps-Porteus model . Elasticityofintertemporal substitution JEL Classification D81 . D91 ... Importantly, we are able to estimate the inter-temporal elasticity of substitution (EIS) in addition to the simple discount factor. ...
... expected consumption growth to the ex ante real interest rate, with ) denoting the in$ tertemporal elasticity of substitution.1 ... no preference shocks, and no government consumption. ... roughly four
percent. I set the elasticityofintertemporalsubstitution, ), to 1, corresponding ...
...Interest- ingly, such a configuration provides an additional explanation for the hump observed
in per-adult ... φ2 which determines the profile of the per-adult equiv- alent consumption. Larger
values of α imply a flatter profile, as the lower intertemporalelasticity...
C Papageorgiou… - … papers= Documentos de …, 2002 - dialnet.unirioja.es
... where, ρ is the discount factor; θ is the inverse of the intertemporalelasticityofsubstitution; δ
is the depreciation rate of capital; n and gA are the exogenously growing rates ... The capital-skill
complementarity would hold in this case if the elasticity of substitution between capital ...
S Lich-Tyler - Manuscrit, University of Michigan at Ann Arbor, 2003 - Citeseer
... and intertemporalelasticityofsubstitution ηit . While individuals have preferences, households ...
in their personal discount factor δi ∈ [ , ]0 1 .4 The household faces the intertemporal budget
constraint, ...consumption dynamics directly, but it is likely to affect bargaining power.14 I ...
E Nelson - Journal of Monetary Economics, 2002 - Elsevier
... g 2 =(βh 2 σ+βhσ−βh 2 –1)/(σ(1−βh)), g 3 =−g 1 /β, g 4 =((1−βhρ v )/(1−βh)), and ρ v is the
AR(1) parameter for the IS shock process (v t ). All variables except interest rates are ... (11) defines
log marginal utility of consumption ( t ). Eq. (12) is the standard Euler relation connecting ...
S Han… - The Economic Journal, 2001 - Wiley Online Library
... Third, our study highlights the importance of the `intergenerational elasticity of substitution' to
the economic ... Parents solve the following intertemporal optimisation problem: ... The second
parameter is the partial family income elasticity of earnings among borrowing constrained ...
... Because utility is time-separable, γ measures the elasticityofintertemporalsubstitution
as well as relative ... Because utility is separable across the two goods, the intertemporal
and across-good elasticities of substitution are also equal. ...
... 1999), or if the investor has Epstein ~in utility with intertemporalelasticityofsubstitution equal
to ... 4We do allow the elasticityofintertemporalsubstitution to differ from the coe cient of relative
risk ... models in which utility is derived from the difference between consumption and a ...
F Alvarez-Cuadrado, JMC Garcia, JML Azcona… - 2010 - webmeets.com
... ral substitution, with the growth rate of consumption of the reference group as a ... Meier (2008) finds
an intertemporalelasticityofsubstitution of 0.1 and Ravina (2008) reports an estimate close to
0.8. ... profile of consumption through the life cycle reported, for instance, by Attanasio ...
O Gorbachev - ESE Discussion Papers, 2007 - nber.org
... 13 Page 14. where αg is the coefficient of relative risk aversion, or the inverse of the intertemporal elasticityofsubstitution, and is allowed to vary by groups, g, but not over time.26 It is well known
that consumption is measured with error. To control for this error, so that we ...
G Li - Journal of Economic Dynamics and Control, 2009 - Elsevier
... consumer maximizes her lifetime utility (1) View the MathML source subject to the intertemporal
budget constraint ... U(C t ) is the intratemporal utility function, r is the real interest rate and ... In particular, consumption growth should not be correlated with the predictable income growth ...
... change in the log of the exchange rate is negatively correlated with the Home less Foreign interest...
label for models of the risk premium that are developed off of the Eulerequation of a representative
agent under complete markets, generally taking the consumption stream as ...
EG Mendoza - Capital Mobility: The Impact on Consumption, …, 1994 - books.google.com
... of relative risk aversion), u>(1 plus the inverse of the intertemporalelasticityofsubstitution in
labour supply ... a (capital's share in output), 8 (depreciation rate),/?(the con- sumption elasticity
of the ... As shown in Mendoza (1992), the assumption that the intertemporal relative price of ...
DK Backus, F Gavazzoni, C Telmer… - NBER Working Paper, 2010 - papers.ssrn.com
... The marginal rate of intertemporalsubstitution, defined as nt+1, is ... (15) The nominal marginal
rate of substitution — the pricing kernel for claims denom- inated in USD units — is then ... Without
policy shocks endogenous inflation will depend only on consumption shocks. ...
...substitution. ... the intertemporalelasticityofsubstitution (EIS) is zero, there is just not enough mean ...
to the model, an individual investor holding only financial wealth (eg a retiree) would have
implausibly volatile consumption, if she is very willing to substituteconsumption over time ...
... on average, for the low educated which should be more prone to substitute their time ... Where
(ρ) is the inverse of the elasticityofintertemporalsubstitution – assumed constant across
individuals – and Z ... of the household head that captures the changes in the intertemporal rate ...
R Garcia, N Meddahi… - SSRN eLibrary, 2008 - papers.ssrn.com
... since there is investment, and although the Euler condition for asset returns still involves
discounting the return by the intertemporal marginal rate of substitution in consumption, the ...
coefficient of relative risk aversion, ψ is the elasticityofintertemporalsubstitution, δ is the ...
J Benhabib… - Carnegie-Rochester Conference Series on Public …, 1995 - Elsevier
... depends on parameter values and is particularly sensitive to the elasticityofintertemporal substitution ~r. If ... 2% and 6%, with the intertem- poral elasticity of substitution set at ... result arises
for very plausible values for both the intertemporalelasticityofsubstitution of consumption...
C Engel - Journal of Empirical Finance, 1996 - Elsevier
... as the relation of uncovered interest parity to real interest parity, and the implications of uncovered interest parity for ... Included in this area are tests of the consumption CAPM, tests of the latent
variable model, and ... Cov(Et(S,+l) st, rprte) + Var(Et(s +t) st) O. From this equation, 13 0 ...
... the magnitude of this effect is determined by the elasticityofintertemporalsubstitution 1/ρ. ... the
extent of re-allocation of consumption across periods determined by the intertemporalelasticity ofsubstitution. ... The intertemporalsubstitution effect, captured by −(1/ρ) (1/r*), tends to im ...
... real interest rate in the economy between t and t+1, and Ri,t+1 is the gross return on ... This is at
odds with the litera- ture on the intertemporal allocation of consumption, which is in wide ... of returns
that we study as we vary S. That is, the sample for per capita consumption runs from ...
A Paseka… - Financial Review, 2010 - Wiley Online Library
... Under simple power utility, the elasticityofintertemporalsubstitution is the reciprocal of the
coefficient of relative risk aversion. ... ψ, Intertemporalelasticityofsubstitution (IES). ... To this end,
we substitute the equity return r m,t+1 , and the risk-free rate dynamics implied by the model ...
T Jappelli, L Pistaferri… - 2003 - papers.ssrn.com
... the intertemporalelasticityofsubstitution; analysis of specific tax reforms. ...intertemporal substitution in consumption. Since Hall's (1978) seminal contribution, the ...elasticity makes it
more likely that the substitution effect dominates the income effect, the Euler...
F Gomes… - Review of Financial Studies, 2008 - Soc Financial Studies
... of debt, the (exogenous) tax rate on capital, and the (endogenous) interest rate on ... by the
preference for low-frequency consumption smoothing, ie, by the elasticityofintertemporal substitution (EIS, ψ ... the level and volatility of the riskless rate, and the consumption growth volatility ...
I Drechsler… - Review of Financial Studies, 2011 - Soc Financial Studies
...consumption at time t, reflects the agent's time preference, γ is the coefficient of risk aversion, ,
and ψ is the intertemporalelasticityofsubstitution (IES ... where is the log of the gross return on
asset j, and is the log of the intertemporal marginal rate of substitution (IMRS), which ...
A Brunila, Bank of Finland - 1997 - suomenpankki.fi
... ie whether government consumption is an Edgeworth complement or substitute for private ... most
of the literature uses nonrational expectations aggregate consumption function that is ... Ricardian
equivalence requires intertemporal utility maximization and rational expectations that ...
... Preliminary results show that the marshallian wage elasticity conditional on husband's earnings
and ... expected sum over time of the discounted utilities under its intertemporal budget constraint ...
differ from the static case since the marginal rate of substitution between consumption...
P Mäki-Fränti - International Economic Journal, 2008 - Taylor & Francis
... Accordingly, assuming a growing path for consumption, the elasticity of the intertemporal rate
of substitution between consumption between dates t+1 and t becomes a ... Thus, the elasticityof intertemporalsubstitution between dates t+1 and t consumption decreases and a ...