Citation
Khvostova, Irina; Larin, Alexander; & Novak, Anna (2014). Euler equation with habits and measurement errors: estimates on Russian micro data. Higher School of Economics Research Paper No. WP BRP 52/EC/2014.Abstract
This paper presents estimates for theconsumption Euler equation for Russia. The estimation is based on micro-level panel data and accounts for the preference heterogeneity, measurement errors, and the impact of macroeconomic shocks. The presence of multiplicative habits is checked with the LM-test in a GMM framework. We obtain estimates of the elasticity of intertemporal substitution and of the subjective discount factor, which
are consistent with the theoretical model and can be used for calibration, as well as for a Bayesian estimation of DSGE models for the Russian economy. We also show that the effects of habit formation are not significant. The hypotheses on habits (external, internal, and both external and internal) are not supported by the data.
URL
http://regconf.hse.ru/uploads/95de301c24a4fc4aba8a6cb4d128955f8a5c0bb9.pdfReference Type
Journal ArticleYear Published
2014Journal Title
Higher School of Economics Research Paper No. WP BRP 52/EC/2014Author(s)
Khvostova, IrinaLarin, Alexander
Novak, Anna