Euler equation with habits and measurement errors: estimates on Russian micro data

Irina Khvostova (), Alexander Larin () and Anna Novak
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Irina Khvostova: National Research University Higher School of Economics
Alexander Larin: National Research University Higher School of Economics

HSE Working papers from National Research University Higher School of Economics

Abstract: This paper presents estimates for the consumption Euler equation for Russia. The estimation is based on micro-level panel data and accounts for the preference heterogeneity, measurement errors, and the impact of macroeconomic shocks. The presence of multiplicative habits is checked with the LM-test in a GMM framework. We obtain estimates of the elasticity of intertemporal substitution and of the subjective discount factor, which are consistent with the theoretical model and can be used for calibration, as well as for a Bayesian estimation of DSGE models for the Russian economy. We also show that the effects of habit formation are not significant. The hypotheses on habits (external, internal, and both external and internal) are not supported by the data

Keywords: household consumption; Euler equation; habit formation; elasticity of intertemporal substitution; RLMS-HSE (search for similar items in EconPapers)
JEL-codes: C23 E21 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2014
New Economics Papers: this item is included in nep-cis, nep-dge, nep-mac and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Published in WP BRP Series: Economics / EC, February 2014, pages 1-32

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Related works:
Journal Article: Euler Equation with Habits and Measurement Errors: Estimates on Russian Micro Data (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:hig:wpaper:52/ec/2014

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