An estimation of deep parameters describing Argentine consumer behaviour

Hildegart Ahumada (hahumada@utdt.edu) and Maria Garegnani (lgaregnani@bcra.gob.ar)

Applied Economics Letters, 2004, vol. 11, issue 11, 719-723

Abstract: This paper investigates the microfoundation of consumer decisions in Argentina (1980:1-2001:3). Structural parameters are estimated following the Euler Equation-GMM approach. Attention is focused on parameter instability, an empirical difficulty for applying this method often pointed out in the literature. The rates of return on assets are approximated by the real interest rate and the rate of growth of real exchange rate as they have been considered as the main variables explaining variations of Argentine 'wealth'. The results show that parameter estimates have the expected values and the correct signs. Overidentifying restrictions are tested and the null hypothesis of validity of instruments is not rejected. Estimates are also robust for different specifications of the weighting matrix. However, parameter constancy is jointly rejected. Recursive estimates show that the risk aversion coefficient appears as more unstable than the impatience parameter, which is also the less uncertain within sample. Observed changes in estimates seem to be an expected response to different macroeconomic frameworks.

Date: 2004
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DOI: 10.1080/1350485042000240084

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