A Time Series Analysis of Representative Agent Models of Consumption andLeisure Choice Under UncertaintyMartin S. Eichenbaum, Lars Peter Hansen, Kenneth J. Singleton
NBER Working Paper No. 1981 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.
Machine-readable bibliographic record - MARC, RIS, BibTeX Document Object Identifier (DOI): 10.3386/w1981 Published: Quarterly Journal of Economics, February 1988. citation courtesy of Users who downloaded this paper also downloaded* these:
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