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Measuring Intertemporal Substitution: The Role of Durable Goods

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  • Masao Ogaki
  • Carmen M. Reinhart

Abstract

As pointed out by Hall (1988), intertemporal substitution by consumers is a central element of many modern macroeconomic and international models. We argue that Hall's estimator or the IES is downward biased because the intra-temporal substitution between nondurable consumption goods and durable consumption goods is ignored and because the changes in real interest rates affect user costs of durable goods.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 106 (1998)
Issue (Month): 5 (October)
Pages: 1078-1098

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Handle: RePEc:ucp:jpolec:v:106:y:1998:i:5:p:1078-1098

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