Elasticity of Intertemporal Substitution in the Euro Area

This paper estimates the elasticity of intertemporal substitution for the euro
area. It leverages the unique design of the Consumer Expectations Survey
in Europe to directly infer it from the Euler equation. Our nal estimates
range between 0.7 and 0.8 for the euro area as a whole, which are higher than
those for the US. We also observe economically sizeable heterogeneity across
the member states, and over time. Belgium, Germany, and the Netherlands
have lower elasticity compared to France, Spain, and Italy. The implications
are discussed.