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Author: | Giuliano, P. Turnovsky, S.J. |
Title: | Intertemporal substitution, risk aversion, and economic performance in a stochastically growing open economy |
Journal: | Journal of International Money and Finance
2003 : AUG, VOL. 22:4, p. 529-556 |
Index terms: | Economic performance Intertemporal economics Risk aversion Stochastic processes |
Freeterms: | Substitution |
Language: | eng |
Abstract: | It is implied by the constant elasticity utility function that the intertemporal elasticity of substitution is the inverse of the coefficient of relative risk aversion. With empirical evidence suggesting that this relationship may or may not hold, studies of risk and growth should decouple these two parameters. An analytical characterization and numerical simulations of the equilibrium of a stochastically growing small open economy under general recursive preferences are provided in this article. |
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