IS THE DUTCH CONSUMER A TRUE RICARDIAN

In this paper the intertemporal optimization approach is adopted in or der to estimate an empirical version of Blanchard's (1985) overlapping generations model. The observed sluggishness in consumption is incorp orated into the model by recognizing both durability and habit formati on as relevant determinants of total consumption. The model is estimat ed using quarterly data for The Netherlands from 1969:I to 1990:IV. Th e empirical estimates suggest that the status of the Dutch consumer as a true Ricardian is unambiguously rejected. The results furthermore s uggest that this rejection is due to the existence of both liquidity c onstraints and finite planning horizons.