Estimating the elasticity of intertemporal substitution: Is the aggregate financial return free from the weak instrument problem?

► We estimate the elasticity of intertemporal substitution for the US economy. ► We considered the T-Bill, stocks, and a synthetic mutual fund returns. ► Most of our estimates suffer from the weak instrument problem. ► Estimates using T-Bill returns suggest that this elasticity is close to zero. ► Estimates using SMF returns suggest that this elasticity is positive and small.