Making the case for a low intertemporal elasticity of substitution
AbstractWe provide two ways to reconcile small values of the intertemporal elasticity of substitution (IES) that range between 0.35 and 0.5 with empirical evidence that the IES is large. We do this reconciliation using a model in which all agents have identical preferences and the same access to asset markets. We also conduct an encompassing test, which indicates that specifications of the model with small values of the IES are more plausible than specifications with a large IES.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Atlanta in its series Working Paper with number 2012-01.
Date of creation: 2012
Date of revision:
Other versions of this item:
- R. Anton Braun & Tomoyuki Nakajima, 2011. "Making the case for a low intertemporal elasticity of substitution," Working Paper 2011-13, Federal Reserve Bank of Atlanta.
- R. Anton Braun & Tomoyuki Nakajima, 2011. "Making the Case for a Low Intertemporal Elasticity of Substitution," KIER Working Papers 788, Kyoto University, Institute of Economic Research.
- E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-02-15 (All new papers)
- NEP-BEC-2012-02-15 (Business Economics)
- NEP-CBA-2012-02-15 (Central Banking)
- NEP-DGE-2012-02-15 (Dynamic General Equilibrium)
- NEP-MAC-2012-02-15 (Macroeconomics)
- NEP-MIC-2012-02-15 (Microeconomics)
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