Blanchard's Model of Consumption: An Empirical Study.

This paper derives several empirically testable implications for O. J. Blanchard's (1985) consumption model that has been widely used in analytical macroeconomic research. Cointegration methods are applied. The parameter that measures the life horizon of households is estimated and the consumption model is tested. Quarterly Canadian data are used. There is no empirical evidence against the assumption that households behave as if they live forever within Blanchard's framework. However, Blanchard's model of consumption is strongly rejected by the data.