The Elasticity of Intertemporal Substitution Reconsidered

The elasticity of intertemporal substitution (EIS) is a crucial parameter in finance and macroeconomics, yet its estimation remains elusive. We show, based on Fisher's relation and the expectations theory of the term structure, that the EIS is the inverse of the product of the average term to maturity of debt instruments and the consumption-output ratio. Therefore, the EIS need not be estimated but can be calibrated from observable data.

MoreLess

Year of publication:	2014-04-26
Authors:	Dladla, Pholile ; Malikane, Christopher ; Ojah, Kalu
Institutions:	Volkswirtschaftliche Fakultät, Ludwig-Maximilians-Universität München
Subject:	Elasticity of intertemporal substitution \| Fisher's relation \| expectations theory of the term structure

freely available

Full text |

More access options

Check Google Scholar

In German libraries (KVK)

I need help

More details

Extent:	application/pdf
Series:	MPRA Paper.
Type of publication:	Book / Working Paper
Classification:	E43 - Determination of Interest Rates; Term Structure Interest Rates ; E44 - Financial Markets and the Macroeconomy
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10011111765