The cross-euler equation approach to intertemporal substitution in import demand

Shin Ichi Nishiyama

Research output: Contribution to journalArticlepeer-review

4 Citations (Scopus)

Abstract

This paper addresses the empirical dilemma in identifying and estimating the parameters governing the intertemporal elasticity of substitution (IBS) for import demand. We propose a new concept, the cross-Euler equation, for overcoming this empirical dilemma. IES parameters are estimated by exploiting the cointegrating restriction implied by the cross-Euler equation. Further, by comparing the IES estimates from the cross-Euler equation to those from the standard Euler equation, we test the hypothesis whether import demand is affected by nuisance factors. Using the US data, we found imported goods consumption to be robust against nuisance factors, but not for domestic goods.

Original languageEnglish
Pages (from-to)841-872
Number of pages32
JournalJournal of Applied Econometrics
Volume20
Issue number7
DOIs
Publication statusPublished - 2005 Dec 1

ASJC Scopus subject areas

  • Social Sciences (miscellaneous)
  • Economics and Econometrics

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