Euler Equation: Estimation on Emerging Markets Data

2016.

Khvostova I., Larin A. V., Novak A.

We address the issue of estimating the Euler equation for emerging mar- kets. Using panel data for Russian households, we show that accounting for consumer type and income level is crucial. Consumers, who have nei- ther savings nor loans, as well as consumers with low income, face liquidity constraints so that the Euler equation for them does not hold. The estima- tion for lenders suers from weak identication so that condence intervals for parameters are wide and any meaningful interpretation is dicult. For consumers with loans, we show that the elasticity of intertemporal sub- stitution (EIS) is signicantly higher than zero. This result is robust to accounting for possible non-optimal behavior of consumers.

Keywords: развивающиеся рынки, RLMS-HSE, межвременное потребление, уравнение Эйлера, household consumption, Euler equiation, emerging markets, мониторинг RLMS-HSE

Publication based on the results of: Моделирование и эконометрическое тестирование микроэкономических предпосылок в моделях общего равновесия (2015)