Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/70708
Authors: 
Braun, R. Anton
Nakajima, Tomoyuki
Year of Publication: 
2012
Series/Report no.: 
Working Paper, Federal Reserve Bank of Atlanta 2012-1
Abstract: 
We provide two ways to reconcile small values of the intertemporal elasticity of substitution (IES) that range between 0.35 and 0.5 with empirical evidence that the IES is large. We do this reconciliation using a model in which all agents have identical preferences and the same access to asset markets. We also conduct an encompassing test, which indicates that specifications of the model with small values of the IES are more plausible than specifications with a large IES.
Subjects: 
uncertainty
intertemporal elasticity of substitution
risk aversion
business cycles
growth
JEL: 
E21
E32
O41
Document Type: 
Working Paper

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