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Measuring Intertemporal Substitution : The Role of Durable Goods

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  • Ogaki, M
  • Reinhart, C-M

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

Paper provided by University of Rochester - Center for Economic Research (RCER) in its series RCER Working Papers with number 404.

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Length: 27 pages
Date of creation: 1995
Date of revision:
Handle: RePEc:roc:rocher:404

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Postal: University of Rochester, Center for Economic Research, Department of Economics, Harkness 231 Rochester, New York 14627 U.S.A.

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Keywords: STATISTICS ; EVALUATION;

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References

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  1. Gordon, Robert J., 1990. "The Measurement of Durable Goods Prices," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226304557, February.
  2. Ogaki, Masao, 1992. "Engel's Law and Cointegration," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 1027-46, October.
  3. Donald W.K. Andrews, 1988. "Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation," Cowles Foundation Discussion Papers 877R, Cowles Foundation for Research in Economics, Yale University, revised Jul 1989.
  4. 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.
  5. West, Kenneth D, 1988. "Asymptotic Normality, When Regressors Have a Unit Root," Econometrica, Econometric Society, vol. 56(6), pages 1397-1417, November.
  6. Reinhart, Carmen & Ostry, Jonathan, 1991. "Private Saving and Terms of Trade Shocks," MPRA Paper 13716, University Library of Munich, Germany.
  7. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  8. Park, J.Y. & Ogaki, M., 1991. "Inference in Cointegrated Models Using VAR Prewhitening to Estimate Shortrun Dynamics," RCER Working Papers 281, University of Rochester - Center for Economic Research (RCER).
  9. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
  10. Rebelo, Sérgio, 1992. "Growth in Open Economies," CEPR Discussion Papers 667, C.E.P.R. Discussion Papers.
  11. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
  12. Martin S. Eichenbaum & Lars Peter Hansen, 1987. "Estimating Models with Intertemporal Substitution Using Aggregate Time Series Data," NBER Working Papers 2181, National Bureau of Economic Research, Inc.
  13. N. Gregory Mankiw, 1983. "Consumer Durables and the Real Interest Rate," NBER Working Papers 1148, National Bureau of Economic Research, Inc.
  14. Atkeson, Andrew & Ogaki, Masao, 1996. "Wealth-varying intertemporal elasticities of substitution: Evidence from panel and aggregate data," Journal of Monetary Economics, Elsevier, vol. 38(3), pages 507-534, December.
  15. Kocherlakota, Narayana R., 1990. "On tests of representative consumer asset pricing models," Journal of Monetary Economics, Elsevier, vol. 26(2), pages 285-304, October.
  16. Dunn, Kenneth B. & Singleton, Kenneth J., 1986. "Modeling the term structure of interest rates under non-separable utility and durability of goods," Journal of Financial Economics, Elsevier, vol. 17(1), pages 27-55, September.
  17. Barro, Robert J., 1990. "Government Spending in a Simple Model of Endogeneous Growth," Scholarly Articles 3451296, Harvard University Department of Economics.
  18. Wykoff, Frank C, 1970. "Capital Depreciation in the Postwar Period: Automobiles," The Review of Economics and Statistics, MIT Press, vol. 52(2), pages 168-72, May.
  19. Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-87, December.
  20. Donald W.K. Andrews & Christopher J. Monahan, 1990. "An Improved Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimator," Cowles Foundation Discussion Papers 942, Cowles Foundation for Research in Economics, Yale University.
  21. Eberly, J.C., 1990. "Adjustment of Consumers'durables Stocks: Evidence from Automobile Purchases," Weiss Center Working Papers 22-91, Wharton School - Weiss Center for International Financial Research.
  22. Yvon Fauvel & Lucie Samson, 1991. "Intertemporal Substitution and Durable Goods: An Empirical Analysis," Canadian Journal of Economics, Canadian Economics Association, vol. 24(1), pages 192-205, February.
  23. Bernanke, Ben, 1985. "Adjustment costs, durables, and aggregate consumption," Journal of Monetary Economics, Elsevier, vol. 15(1), pages 41-68, January.
  24. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
  25. han, H.L. & Ogaki, M., 1991. "Consumption, Income, and Cointegration Further Analysis," RCER Working Papers 305, University of Rochester - Center for Economic Research (RCER).
  26. Park, Joon Y, 1992. "Canonical Cointegrating Regressions," Econometrica, Econometric Society, vol. 60(1), pages 119-43, January.
  27. Cooley, Thomas F & Ogaki, Masao, 1996. "A Time Series Analysis of Real Wages, Consumption, and Asset Returns," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(2), pages 119-34, March-Apr.
  28. Fauvel, Y. & Samson, L., 1989. "Intertemporal Substitution And Durable Goods: An Empircal Analysis," Cahiers de recherche 8916, Université Laval - Département d'économique.
  29. Lam, Pok-sang, 1989. "Irreversibility and consumer durables expenditures," Journal of Monetary Economics, Elsevier, vol. 23(1), pages 135-150, January.
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