Skip to Main Content

Economic Review

Nov/Dec, 1989

Estimating Intertemporal Elasticity of Substitution

Ching-Sheng Mao

Are linear regression models reliable in testing whether high expected real interest rates encourage current savings and deferred consumption? Here, a Monte Carlo test shows that a linear model yields a fairly accurate estimate and small standard error, but is highly susceptible to specification bias.

Phone Icon Contact Us

Lisa Davis (804) 697-8179