Braun, R. Anton; Nakajima, Tomoyuki - Institute of Economic Research, Kyoto University - 2011
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. This is done using a model in which all agents have identical preferences and the same access to asset markets. We...