In this paper, we use the technique proposed by Deaton (1991) to simulate the evolution of consumption and saving of representative individuals. The simulation technique imposes the Euler equation, which has been estimated using cohort data from the ECPF between 1985 and 1995. The main aims of this study are: i) to check whether simulation techniques replicate consumption and saving aggregates and ii) to identify the effects on savings of some microeconomic factors. The results show that individuals consider the difference between the time preference rate and the interest rate (rather than their levels) as the relevant variable to allocate their lifetime wealth. They also show that uncertainty in income is a major determinant of consumption and precautionary saving in Spain.

Key words: microsimulation, cohort, pseudo-panel, Euler equation.
JEL classification: C15, C23, D12, E21.