Elasticity of Intertemporal Substitution in the Euro Area

Michal Marenčák and Giang Nghiem

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: This paper estimates the elasticity of intertemporal substitution for the euro area. It leverages the unique design of the Consumer Expectations Survey in Europe to directly infer it from the Euler equation. Our final estimates range between 0.7 and 0.8 for the euro area as a whole, which are higher than those for the US. We also observe economically sizeable heterogeneity across the member states, and over time. Belgium, Germany, and the Netherlands have lower elasticity compared to France, Spain, and Italy. The implications are discussed.

Keywords: inflation; expectations; consumption; intertemporal elasticity of substitution; Euler equation; Consumer Expectations Survey (search for similar items in EconPapers)
JEL-codes: D12 D15 D84 E21 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2024-09
New Economics Papers: this item is included in nep-eec and nep-eur
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https://cama.crawford.anu.edu.au/sites/default/fil ... _marencak_nghiem.pdf

Related works:
Journal Article: Elasticity of intertemporal substitution in the euro area (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2024-56

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