A Time Series Analysis of Representative Agent Models of Consumption andLeisure Choice Under Uncertainty / Martin S. Eichenbaum, Lars Peter Hansen, Kenneth J. Singleton.

Format:

Book

Author/Creator:

Eichenbaum, Martin S.

Contributor:

National Bureau of Economic Research.

Hansen, Lars Peter.

Singleton, Kenneth J.

Series:

Working Paper Series (National Bureau of Economic Research) no. w1981.

NBER working paper series no. w1981

Language:

English

Subjects (All):

Consumers--Mathematical models.

Consumers.

Consumption (Economics)--Econometric models.

Consumption (Economics).

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1986.

Cambridge, Massachusetts : National Bureau of Economic Research, 1986.

Summary:

This paper investigates empirically a model of aggregate consumption and

leisure decisions in which goods and leisure provide services over time. The

implied time non-separability of preferences introduces an endogenous source of

dynamics which affects both the co-movements in aggregate compensation and hours

worked and the cross-relations between prices and quantities. These cross-relations

are examined empirically using post-war monthly U.S. data on quantities,

real wages and the real return on the one-month Treasury bill. We find

substantial evidence against the overidentifying restrictions. The test results

suggest that the orthogonality conditions associated with the representative

consumer's intratemporal Euler equation underlie the failure of the model.

Additionally, the estimated values of key parameters differ significantly from

the values assumed in several studies of real business models. Several possible

reasons for these discrepancies are discussed.

Notes:

Print version record

July 1986.