The Elasticity of Intertemporal Substitution Reconsidered
Christopher Malikane () and
Kalu Ojah ()
MPRA Paper from University Library of Munich, Germany
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.
Keywords: Elasticity of intertemporal substitution; Fisher's relation; expectations theory of the term structure. (search for similar items in EconPapers)
JEL-codes: E43 E44 (search for similar items in EconPapers)
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