Measuring the Intertemporal Elasticity of Substitution for Consumption: Some Evidence from Japan
AbstractThe purpose of this paper is to present improved estimates of the intertemporal elasticity of substitution (IES) for Japan assuming a constant relative risk aversion (CRRA) utility function. The estimates of the IES we obtain range from 0.2 to 0.5 when we use quarterly consumption data and the Continuous Updating Estimator (CUE). We find that the IES is weakly identified when we employ the two-step GMM estimator, while the CUE can identify the IES. Moreover, we also find that using consumption data of different frequencies leads to quite different estimates of the IES.
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Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 30 (2010)
Issue (Month): 1 ()
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Intertemporal Elasticity of Substitution; Relative Risk Aversion; Generalized Method of Moments; Continuous Updating Estimator; Weak Identifi cation;
Find related papers by JEL classification:
- D9 - Microeconomics - - Intertemporal Choice
- E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
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- Steven Lugauer & Nelson Mark & Horag Choi, 2013. "The Size of the Precautionary Component of Household Saving: China and the U.S," 2013 Meeting Papers, Society for Economic Dynamics 1046, Society for Economic Dynamics.
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