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Contribution Details
| Type | Journal Article |
| Scope | Discipline-based scholarship |
| Title | Loss aversion in aggregate macroeconomic time series |
| Organization Unit | |
| Authors |
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| Item Subtype | Original Work |
| Refereed | Yes |
| Status | Published in final form |
| Language |
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| Journal Title | European Economic Review |
| Publisher | Elsevier |
| Geographical Reach | international |
| ISSN | 0014-2921 |
| Volume | 52 |
| Number | 7 |
| Page Range | 1140 - 1159 |
| Date | 2008 |
| Abstract Text | Prospect theory has been the focus of increasing attention in many fields of economics. However, it has scarcely been addressed in macroeconomic growth models--neither on theoretical nor on empirical grounds. In this paper we use prospect theory in a stochastic optimal growth model. Thereafter, the focus lies on linking the Euler equation obtained from a prospect theory growth model of this kind to real macroeconomic data. We will use generalized method of moments (GMM) estimation to test the implications of such a non-linear prospect utility Euler equation. Our results indicate that loss aversion can be traced in aggregate macroeconomic time series. |
| Digital Object Identifier | 10.1016/j.euroecorev.2007.12.001 |
| Other Identification Number | merlin-id:5866 |
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