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Pasha Critique

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Submitted By hasnain0099
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Summery
The paper focuses on determination of Coefficient of CRRA function as well as the discount factor for developing countries including Pakistan. The paper argues that it would be an improper exercise to calculate the discount factor given suitable data as well as methodologies remain present. The paper then calculates separately the discount factor and Coefficient of CRRA for Pakistan.

Comments
1- When assigning the proxy of expected inflation to lagged value under the assumption of adaptive expectations, authors do not refer to any previous work that have utilized such assumption and resulting implications. 2- It would be better had a scatter been introduced instead of Table 1 to make the inverse relationship between RIR and discount factor more visible. Furthermore, authors have neglected the observations of Venezuela which seem as an outlier 3- Moreover, the authors could expand the discussion by incorporating the probable impact of monetary regime followed by respective central banks (e.g. inflation targeting, taylor rule etc) 4- For coefficient of CRRA, the ADF test (Table 2) doesn’t specify whether the constant or trend has been included or not in ADF test application. 5- While the authors argue that the coefficient of Risk Aversion as well as Discount Factor are significant, the P-Values reported in Table 3 for both variables are insignificant at 5%. The authors however argue that since the magnitude is different from zero to a certain degree, the coefficients are significantly different from zero and neglect the pvalue insignificance in their discussion.

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