A Time Series Analysis of Representative Agent Models of Consumption andLeisure Choice Under Uncertainty
AbstractThis paper investigates empirically a model of aggregate consumption and leisure decisions in which goods and leisure provide services over time. The implied time non-separability of preferences introduces an endogenous source of dynamics which affects both the co-movements in aggregate compensation and hours worked and the cross-relations between prices and quantities. These cross-relations are examined empirically using post-war monthly U.S. data on quantities, real wages and the real return on the one-month Treasury bill. We find substantial evidence against the overidentifying restrictions. The test results suggest that the orthogonality conditions associated with the representative consumer's intratemporal Euler equation underlie the failure of the model. Additionally, the estimated values of key parameters differ significantly from the values assumed in several studies of real business models. Several possible reasons for these discrepancies are discussed.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1981.
Date of creation: Jul 1986
Date of revision:
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Other versions of this item:
- Eichenbaum, Martin S & Hansen, Lars Peter & Singleton, Kenneth J, 1988. "A Time Series Analysis of Representative Agent Models of Consumption and Leisure Choice under Uncertainty," The Quarterly Journal of Economics, MIT Press, vol. 103(1), pages 51-78, February.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Orley Ashenfelter & David Card, 1982.
"Time Series Representation of Economic Variables and Alternative Models of the Labor Market,"
528, Princeton University, Department of Economics, Industrial Relations Section..
- Ashenfelter, Orley C & Card, David, 1982. "Time Series Representations of Economic Variables and Alternative Models of the Labour Market," Review of Economic Studies, Wiley Blackwell, vol. 49(5), pages 761-81, Special I.
- N. Gregory Mankiw & Julio J. Rotemberg & Lawrence H. Summers, 1986.
"Intertemporal Substitution in Macroeconomics,"
NBER Working Papers
0898, National Bureau of Economic Research, Inc.
- Lars Peter Hansen & Robert J. Hodrick, 1983. "Risk Averse Speculation in the Forward Foreign Exchange Market: An Econometric Analysis of Linear Models," NBER Chapters, in: Exchange Rates and International Macroeconomics, pages 113-152 National Bureau of Economic Research, Inc.
- Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
- Brown, Bryan W & Maital, Shlomo, 1981. "What Do Economists Know? An Empirical Study of Experts' Expectations," Econometrica, Econometric Society, vol. 49(2), pages 491-504, March.
- Pollak, Robert A, 1970. "Habit Formation and Dynamic Demand Functions," Journal of Political Economy, University of Chicago Press, vol. 78(4), pages 745-63, Part I Ju.
- Gallant, A. Ronald & Jorgenson, Dale W., 1979. "Statistical inference for a system of simultaneous, non-linear, implicit equations in the context of instrumental variable estimation," Journal of Econometrics, Elsevier, vol. 11(2-3), pages 275-302.
- Martin S. Eichenbaum & Lars Peter Hansen, 1991.
"Estimating Models with Intertemporal Substitution Using Aggregate Time Series Data,"
NBER Working Papers
2181, National Bureau of Economic Research, Inc.
- Eichenbaum, Martin & Hansen, Lars Peter, 1990. "Estimating Models with Intertemporal Substitution Using Aggregate Time Series Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(1), pages 53-69, January.
- Hall, Robert E., 1980.
"Labor supply and aggregate fluctuations,"
Carnegie-Rochester Conference Series on Public Policy,
Elsevier, vol. 12(1), pages 7-33, January.
- Muellbauer, John N J, 1981. "Linear Aggregation in Neoclassical Labour Supply," Review of Economic Studies, Wiley Blackwell, vol. 48(1), pages 21-36, January.
- Lucas, Robert E, Jr & Rapping, Leonard A, 1969. "Real Wages, Employment, and Inflation," Journal of Political Economy, University of Chicago Press, vol. 77(5), pages 721-54, Sept./Oct.
- Hansen, Lars Peter & Hodrick, Robert J, 1980. "Forward Exchange Rates as Optimal Predictors of Future Spot Rates: An Econometric Analysis," Journal of Political Economy, University of Chicago Press, vol. 88(5), pages 829-53, October.
- Altonji, Joseph G, 1982. "The Intertemporal Substitution Model of Labour Market Fluctuations: An Empirical Analysis," Review of Economic Studies, Wiley Blackwell, vol. 49(5), pages 783-824, Special I.
- Rubinstein, Mark, 1974. "An aggregation theorem for securities markets," Journal of Financial Economics, Elsevier, vol. 1(3), pages 225-244, September.
- Brennan, M. J. & Kraus, Alan, 1978. "Necessary Conditions for Aggregation in Securities Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 13(03), pages 407-418, September.
- Kydland, Finn E & Prescott, Edward C, 1982.
"Time to Build and Aggregate Fluctuations,"
Econometric Society, vol. 50(6), pages 1345-70, November.
- Finn E. Kydland & Edward C. Prescott, 1982. "Executable program for "Time to Build and Aggregate Fluctuations"," QM&RBC Codes 4, Quantitative Macroeconomics & Real Business Cycles.
- Finn E. Kydland & Edward C. Prescott, 1982. "Web interface for "Time to Build and Aggregate Fluctuations"," QM&RBC Codes 4a, Quantitative Macroeconomics & Real Business Cycles.
- Hansen, Lars Peter & Singleton, Kenneth J, 1982. "Generalized Instrumental Variables Estimation of Nonlinear Rational Expectations Models," Econometrica, Econometric Society, vol. 50(5), pages 1269-86, September.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading lists or Wikipedia pages:
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.