Death to the Log-Linearized Consumption Euler Equation! (And Very Poor Health to the Second-Order Approximation)

By Christopher D. Carroll. 2001

260 citations recorded by the source corpus.

Subfields: Economics and Econometrics, Renewable Energy, Sustainability and the Environment, Sociology and Political Science

View Paper: https://www.semanticscholar.org/paper/4dc4ca6f82d44d5ac98d93218678beff00665f19

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Citations in the corpus

A Tax-Based Estimate of the Elasticity of Intertemporal Substitution (2013, unknown): “This point is highlighted by the provocatively titled paper by Carroll (1997).”
Matlab code for The Labor-Supply Elasticity and Borrowing Constraints: Why Estimates are Biased (2001, methodology): “Equation (20) shows that 10 See the Appendix for the expressions with constraints. the log-level equation, even if estimated on leisure, is not related to the intertemporal elasticity.”
PRECAUTIONARY S AVING A ND SOCIAL L EARNING ACROSS G ENERATIONS: A N E XPERIMENT* (2003, unknown): “‘deeply ambiguous’, for reasons ranging from the wide variety of potential savings motives to conceptual measurement issues and econometric problems (Deaton, 1992; Attanasio and Weber, 1995; Carroll, 2001; Ludvigson and Paxson, 2001).”
CONSUMPTION AND SAVING OVER THE LIFE CYCLE: HOW IMPORTANT ARE CONSUMER DURABLES? (2011, methodology): “In this case our models nests a dynamic general equilibrium version of Carroll (1997) and Gourinchas and Parker (2002).27 We find two main differences from our benchmark calibration.”
Estimating Panel Models With Internal and External Habit Formation (2010, background): “Carroll (1997) argues that individuals save due to precautionary motives to finance consumption in unforeseen bad states of the economy.”
MEASURING INTERTEMPORAL SUBSTITUTION: THE IMPORTANCE OF METHOD CHOICES AND SELECTIVE REPORTING (2015, methodology): “Carroll (2001) is skeptical about the use of log-linearized consumption Euler equations for the estimation of the EIS, because higherorder terms may be endogenous to omitted variables. In contrast, Attanasio & Low (2004) argue that the log-linear Euler equation performs better than non-linear GMM. M”
Saving and Habit Formation : Evidence from Dutch Panel Data (2002, background): “(2000), the following additional moment restrictions based upon a mean stationarity assumption can be used to improve e¢ciency: E ¢sit¡1uit = 0 (14)”
Precautionary Saving and Precautionary Wealth (2006, background): “Some papers like Dynan (1993) attempted to account for precautionary contributions to consumption growth; but see Carroll (2001) for a critique of the whole Euler equation literature (including the second-order approach).”
Cross-Country Heterogeneity in Intertemporal Substitution (2015, background): “But Carroll (2001), for example, criticizes the common practice on the ground that higher-order terms may be endogenous to omitted variables in the regression resulting from the log-linear Euler equation.”
Saving and Growth with Habit Formation (2000, background): “A related paper (Carroll, Overland, and Weil (1997)), shows that behavior is qualitatively similar in a model with atomistic households in which the externality is not taken into account by decision-makers (sometimes called a model with ‘external habits’).”