NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

A Time Series Analysis of Representative Agent Models of Consumption andLeisure Choice Under Uncertainty

Martin S. Eichenbaum, Lars Peter Hansen, Kenneth J. Singleton

NBER Working Paper No. 1981
Issued in July 1986
NBER Program(s):   EFG

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.

download in pdf format
   (321 K)

download in djvu format
   (240 K)

email paper

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:
Campbell and Mankiw Consumption, Income and Interest Rates: Reinterpreting the Time Series Evidence
Eichenbaum and Hansen w2181 Estimating Models with Intertemporal Substitution Using Aggregate Time Series Data
Hansen and Sargent w3479 Recursive Linear Models of Dynamic Economies
Barro and King w0888 Time-Separable Preference and Intertemporal-Substitution Models of Business Cycles
Hansen and Jagannathan t0089 Implications of Security Market Data for Models of Dynamic Economies
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us