Estimation of the Elasticity of the Substitution in the Czech Economy Using the Low-Pass Filter Model
Language: en
Last modified: 2018-04-10
Abstract
The value of the elasticity of substitution in the Czech economy is substantially below one. It follows from the estimation of the coefficient using Czech data and low-pass filter model. The estimation form comes from the first order condition of the representative firm. The relationship corresponds to the capital demand. Unit elasticity of substitution is assumed by the Cobb-Douglas production function. The estimation rejects this assumption.
Keywords
Elasticity of the substitution; Low-pass filter model; Czech economy; Capital demand
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