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GARP, SEPARABILITY, AND THE REPRESENTATIVE AGENT

Published online by Cambridge University Press:  05 October 2000

Adrian R. Fleissig
Affiliation:
California State University, Fullerton
Alastair R. Hall
Affiliation:
North Carolina State University
John J. Seater
Affiliation:
North Carolina State University

Abstract

We examine whether annual, quarterly, and monthly U.S. aggregate consumption data could have been generated by a utility-maximizing representative agent with intertemporally separable utility. The model appears inapplicable over the full time periods covered by the NIPA data, which are the sample periods often used in the literature. The model does appear applicable, however, over long subsamples. The data also are inconsistent with separability assumptions routinely made in the literature. In particular, the main categories of consumption (nondurables, services, and durables) are not mutually separable. We consider the implications of our results for inference about consumption based on the representative-agent model.

Type
Research Article
Copyright
© 2000 Cambridge University Press

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