Publication
Oct 2002
This paper examines how the consumption-based Euler equation test of capital mobility performs if its restrictive assumptions on consumer behavior are relaxed. The authors simulate a dynamic general equilibrium two-country model under alternative assumptions regarding consumer preferences and use the simulated time series to test for the degree of capital mobility. They find that the Euler equation test discriminates fairly well between high and low capital mobility regimes even if its restrictive assumptions on consumer behavior are not satisfied.
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English (PDF, 35 pages, 475 KB) |
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Author | Claudia M Buch, Joerg Doepke, Christian Pierdzioch |
Series | Kiel Institute Working Papers |
Issue | 1131 |
Publisher | Kiel Institute for the World Economy |
Copyright | © 2002 Kiel Institute for the World Economy |