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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Paper provided by University of Rochester - Center for Economic Research (RCER) in its series RCER Working Papers with number
404.
Length: 27 pages Date of creation: 1995 Date of revision: Handle: RePEc:roc:rocher:404
Contact details of provider: Postal: UNIVERSITY OF ROCHESTER, CENTER FOR ECONOMIC RESEARCH, DEPARTMENT OF ECONOMICS, HARKNESS 231 ROCHESTER NEW YORK 14627 U.S.A.
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Find related papers by JEL classification: C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Estimation
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