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Estimation of Discount Factor ß and Coefficient of Relative Risk Aversion ? in Selected Countries

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  • Waqas Ahmed
  • Adnan Haider
  • Javed Iqbal

Abstract

The long-run discount factor for a group of developed and developing countries is estimated through standard methodology incorporating adaptive expectations of inflation. In the second part, while considering a standard Euler equation for household's intertemporal consumption, the parameter of constant relative risk aversion (CRRA) for Pakistan is estimated by using the Generalized Method of Moments (GMM) approach. The resulting parameter value of CRRA conforms to the empirical range for developing countries (as given in, Cardenas and Carpenter, 2008) The GMM estimator for the discount factor reinforces its result from the first part of the paper. [SBP WP no. 53]. URL:[http://www.sbp.org.pk/publications/wpapers/2012/wp53.pdf].

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  • Waqas Ahmed & Adnan Haider & Javed Iqbal, 2012. "Estimation of Discount Factor ß and Coefficient of Relative Risk Aversion ? in Selected Countries," Working Papers id:5087, eSocialSciences.
    • Handle: RePEc:ess:wpaper:id:5087
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    Cited by:

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    2. Vera Ivanova & Philip Ushchev, 2019. "Product Differentiation, Competitive Toughness, and Intertemporal Substitution," Scandinavian Journal of Economics, Wiley Blackwell, vol. 121(3), pages 1244-1269, July.
    3. Dufrénot, Gilles & Khayat, Guillaume A., 2017. "Monetary Policy Switching In The Euro Area And Multiple Steady States: An Empirical Investigation," Macroeconomic Dynamics, Cambridge University Press, vol. 21(5), pages 1175-1188, July.
    4. Shahid, Muhammad & Qayyum, Abdul & Shahid, Waseem, 2016. "Fiscal and Monetary Policy Interactions in Pakistan Using a Dynamic Stochastic General Equilibrium Framework," MPRA Paper 72595, University Library of Munich, Germany.
    5. Abe Dunn & Joshua D. Gottlieb & Adam Shapiro & Daniel J. Sonnenstuhl & Pietro Tebaldi, 2021. "A Denial a Day Keeps the Doctor Away," NBER Working Papers 29010, National Bureau of Economic Research, Inc.
    6. Adnan Haider & Asad Jan & Kalim Hyder, 2013. "On the (Ir)Relevance of Monetary Aggregate Targeting in Pakistan: An Eclectic View," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 18(2), pages 65-119, July-Dec.
    7. Gilles Dufrénot & Anwar Khayat, 2014. "Monetary Policy Switching in the Euro Area and Multiple Equilibria: An Empirical Investigation," Working Papers halshs-00973504, HAL.
    8. Ahmed, Waqas, 2012. "Pakistan Economy DSGE Model with Informality-The Empirics of Calibration," MPRA Paper 53167, University Library of Munich, Germany.
    9. Hugo Reis, 2020. "Girls' Schooling Choices And Home Production: Evidence From Pakistan," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 61(2), pages 783-819, May.
    10. Etelvina Stefani Chavez & Gastón Milanesi & Gabriela Pesce, 2021. "Aversión al riesgo implícita en los precios de mercado de diferentes activos financieros de Argentina," Remef - Revista Mexicana de Economía y Finanzas Nueva Época REMEF (The Mexican Journal of Economics and Finance), Instituto Mexicano de Ejecutivos de Finanzas, IMEF, vol. 16(1), pages 1-23, Enero - M.
    11. Ahmed, Waqas & Rehman, Muhammad & Malik, Jahanzeb, 2013. "Quarterly Bayesian DSGE Model of Pakistan Economy with Informality," MPRA Paper 53168, University Library of Munich, Germany.
    12. Tina L. Saitone & Richard J. Sexton & Benoît Malan, 2018. "Price premiums, payment delays, and default risk: understanding developing country farmers’ decisions to market through a cooperative or a private trader," Agricultural Economics, International Association of Agricultural Economists, vol. 49(3), pages 363-380, May.

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    More about this item

    Keywords

    Discount Factor; relative risk; economics; future returns;
    All these keywords.

    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C87 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Econometric Software

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