TY - JOUR
T1 - A cointegration approach to estimating preference parameters
AU - Ogaki, Masao
AU - Park, Joon Y.
N1 - Funding Information:
that was supported by NSF Grant SES-details about how the GMM is applied
PY - 1998/1
Y1 - 1998/1
N2 - In this paper, we estimate the (long-run) intertemporal elasticity of substitution of non-durable consumption, which has often been estimated with the generalized methods of moments (GMM). The GMM estimator, however, is not consistent in the presence of liquidity constraints, aggregation over heterogeneous consumers, unknown preference shocks, or a general form of time-nonseparability. We use Engle and Granger's cointegration methodology in order to develop an estimator which is consistent even in the presence of these factors. We then form a formal test that compares the estimates obtained using cointegration techniques with those obtained using GMM.
AB - In this paper, we estimate the (long-run) intertemporal elasticity of substitution of non-durable consumption, which has often been estimated with the generalized methods of moments (GMM). The GMM estimator, however, is not consistent in the presence of liquidity constraints, aggregation over heterogeneous consumers, unknown preference shocks, or a general form of time-nonseparability. We use Engle and Granger's cointegration methodology in order to develop an estimator which is consistent even in the presence of these factors. We then form a formal test that compares the estimates obtained using cointegration techniques with those obtained using GMM.
KW - Consumption-based asset pricing
KW - Intertemporal elasticity of substitution
UR - http://www.scopus.com/inward/record.url?scp=0000472416&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=0000472416&partnerID=8YFLogxK
U2 - 10.1016/S0304-4076(97)00053-5
DO - 10.1016/S0304-4076(97)00053-5
M3 - Article
AN - SCOPUS:0000472416
VL - 82
SP - 107
EP - 134
JO - Journal of Econometrics
JF - Journal of Econometrics
SN - 0304-4076
IS - 1
ER -