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Measuring Intertemporal Substitution : The Role of Durable Goods

  • Ogaki, M
  • Reinhart, C-M

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.

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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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  1. Ben S. Bernanke, 1982. "Adjustment Costs, Durables, and Aggregate Consumption," NBER Working Papers 1038, National Bureau of Economic Research, Inc.
  2. Ogaki, M., 1990. "Engel'S Law And Cointegration," RCER Working Papers 228, University of Rochester - Center for Economic Research (RCER).
  3. han, H.L. & Ogaki, M., 1991. "Consumption, Income, and Cointegration Further Analysis," RCER Working Papers 305, University of Rochester - Center for Economic Research (RCER).
  4. Eberly, Janice C, 1994. "Adjustment of Consumers' Durables Stocks: Evidence from Automobile Purchases," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 403-36, June.
  5. 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).
  6. Jonathan David Ostry & Carmen Reinhart, 1991. "Private Saving and Terms of Trade Shocks; Evidence From Developing Countries," IMF Working Papers 91/100, International Monetary Fund.
  7. 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.
  8. Rebelo, Sérgio, 1992. "Growth in Open Economies," CEPR Discussion Papers 667, C.E.P.R. Discussion Papers.
  9. Barro, R.J., 1988. "Government Spending In A Simple Model Of Endogenous Growth," RCER Working Papers 130, University of Rochester - Center for Economic Research (RCER).
  10. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
  11. Fauvel, Y. & Samson, L., 1989. "Intertemporal Substitution And Durable Goods: An Empircal Analysis," Cahiers de recherche 8916, Université Laval - Département d'économique.
  12. Kocherlakota, Narayana R., 1990. "On tests of representative consumer asset pricing models," Journal of Monetary Economics, Elsevier, vol. 26(2), pages 285-304, October.
  13. 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.
  14. 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.
  15. Andrews, Donald W K, 1991. "Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation," Econometrica, Econometric Society, vol. 59(3), pages 817-58, May.
  16. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  17. 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.
  18. 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.
  19. Atkeson, A. & Ogaki, M., 1991. "Wealth-Varying Intertemporal Elasticities of Substitution Evidence from Panel and Aggregate Data," RCER Working Papers 303, University of Rochester - Center for Economic Research (RCER).
  20. N. Gregory Mankiw, 1983. "Consumer Durables and the Real Interest Rate," NBER Working Papers 1148, National Bureau of Economic Research, Inc.
  21. 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.
  22. 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.
  23. 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.
  24. Gordon, Robert J., 1990. "The Measurement of Durable Goods Prices," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226304557.
  25. Andrews, Donald W K & Monahan, J Christopher, 1992. "An Improved Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimator," Econometrica, Econometric Society, vol. 60(4), pages 953-66, July.
  26. Lam, Pok-sang, 1989. "Irreversibility and consumer durables expenditures," Journal of Monetary Economics, Elsevier, vol. 23(1), pages 135-150, January.
  27. Park, Joon Y, 1992. "Canonical Cointegrating Regressions," Econometrica, Econometric Society, vol. 60(1), pages 119-43, January.
  28. 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.
  29. West, Kenneth D, 1988. "Asymptotic Normality, When Regressors Have a Unit Root," Econometrica, Econometric Society, vol. 56(6), pages 1397-1417, November.
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