Expectations and intertemporal separability in an empirical model of consumption and investment under uncertainty |
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Authors: | P J Deschamps |
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Institution: | 1. Institute for Automation and Operations Research, University of Fribourg, Miséricorde, CH-1700, Fribourg, Switzerland
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Abstract: | An intertemporal model of consumption and investment under uncertainty is formulated, and compared with the existing literature; it is argued that an assumption of myopia is necessary for its empirical applicability. It is estimated by maximum likelihood with quarterly British data. A specification search for a satisfactory form of expectations is made, and the estimated model is compared with a static demand system. Strong intertemporal separability is formulated as a nested hypothesis, and strongly rejected by a likelihood ratio test. |
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Keywords: | JEL classification System-Numbers" target="_blank">JEL classification System-Numbers D 12 |
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