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Homework in macroeconomics: household production and aggregate fluctuations

  • Jess Benhabib
  • Richard Rogerson
  • Randall Wright

This paper explores some macroeconomic implications of including household production in an otherwise standard real business cycle model. We calibrate the model based on microeconomic evidence and long run considerations, simulate it, and examine its statistical properties Our finding is that introducing home production significantly improves the quantitative performance of the standard model along several dimensions. It also implies a very different interpretation of the nature of aggregate fluctuations.

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Paper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 135.

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Date of creation: 1991
Date of revision:
Publication status: Published in Journal of Political Economy (Vol 99, Num 6, December 1991, pp. 1166-1187)
Handle: RePEc:fip:fedmsr:135
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  1. Finn E. Kydland & Edward C. Prescott, 1989. "Hours and employment variation in business cycle theory," Discussion Paper / Institute for Empirical Macroeconomics 17, Federal Reserve Bank of Minneapolis.
  2. Gary S. Becker, . "Family Economics and Macro Behavior," University of Chicago - Population Research Center 87-16, Chicago - Population Research Center.
  3. Edward C. Prescott, 1986. "Theory ahead of business cycle measurement," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 9-22.
  4. King, Robert G & Plosser, Charles I & Rebelo, Sergio T, 2002. "Production, Growth and Business Cycles: Technical Appendix," Computational Economics, Society for Computational Economics, vol. 20(1-2), pages 87-116, October.
  5. Greenwood, J. & Hercowitz, Z., 1991. "The Allocation of Capital and Time Over the Business Cycles," UWO Department of Economics Working Papers 9104, University of Western Ontario, Department of Economics.
  6. Hansen, Gary D., 1985. "Indivisible labor and the business cycle," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 309-327, November.
  7. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
  8. Benhabib, Jess & Rogerson, Richard & Wright, Randall, 1990. "Homework In Macroeconomics I: Basic Theory," Working Papers 90-17, C.V. Starr Center for Applied Economics, New York University.
  9. Benhabib, Jess & Rogerson, Richard & Wright, Randall, 1990. "Homework In Macroeconomics Ii: Aggregate Fluctuations," Working Papers 90-18, C.V. Starr Center for Applied Economics, New York University.
  10. Plosser, C.I., 1989. "Understanding Real Business Cycles," Papers 89-03, Rochester, Business - General.
  11. Eisner, Robert, 1988. "Extended Accounts for National Income and Product," Journal of Economic Literature, American Economic Association, vol. 26(4), pages 1611-84, December.
  12. Rios-Rull, Jose-Victor, 1993. "Working in the Market, Working at Home, and the Acquisition of Skills: A General-Equilibrium Approach," American Economic Review, American Economic Association, vol. 83(4), pages 893-907, September.
  13. Martin S. Eichenbaum & Lars Peter Hansen, 1987. "Estimating Models with Intertemporal Substitution Using Aggregate Time Series Data," NBER Working Papers 2181, National Bureau of Economic Research, Inc.
  14. Reuben Gronau & R. Layard, . "Home Production - A Survey," University of Chicago - Population Research Center 85-2, Chicago - Population Research Center.
  15. Reuben Gronau, 1976. "Leisure, Home Production and Work--The Theory of The Allocation of Time Revisited," NBER Working Papers 0137, National Bureau of Economic Research, Inc.
  16. Lawrence J. Christiano & Martin Eichenbaum, 1988. "Is Theory Really Ahead of Measurement? Current Real Business Cycle Theories and Aggregate Labor Market Fluctuations," NBER Working Papers 2700, National Bureau of Economic Research, Inc.
  17. Ed Nosal & Richard Rogerson & Randall Wright, 1991. "A note on labor contracts with private information and household production," Staff Report 131, Federal Reserve Bank of Minneapolis.
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  1. Quantitative Macroeconomics and Real Business Cycles (QM&RBC)

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