Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/307739 
Year of Publication: 
2024
Series/Report no.: 
Hannover Economic Papers (HEP) No. 725
Publisher: 
Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät, Hannover
Abstract: 
This paper estimates the elasticity of intertemporal substitution for the euro area. It leverages the unique design of the Consumer Expectations Survey in Europe to directly infer it from the Euler equation. Our final estimates range between 0.7 and 0.8 for the euro area as a whole, which are higher than those for the US. We also observe economically sizeable heterogeneity across the member states, and over time. Belgium, Germany, and the Netherlands have lower elasticity compared to France, Spain, and Italy. The implications are discussed.
Subjects: 
inflation
expectations
consumption
intertemporal elasticity of substitution
Euler equation
Consumer Expectations Survey
JEL: 
D12
D15
D84
E21
Document Type: 
Working Paper

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