An equilibrium model of the business cycle with household production and fiscal policy

Ellen R. Mcgrattan, Richard Rogerson, Randall Wright

Research output: Contribution to journalArticlepeer-review

151 Scopus citations

Abstract

We estimate a dynamic general equilibrium model of the U.S. economy that includes an explicit household production sector and stochastic fiscal variables. We use our estimates to investigate two issues. First, we analyze how well the model accounts for aggregate fluctuations. We find that household production has a significant impact and reject a nested specification in which changes in the home production technology do not matter for market variables. Second, we study the effects of some simple fiscal policy experiments and show that the model generates different predictions for the effects of tax changes than similar models without home production.

Original languageEnglish (US)
Pages (from-to)267-290
Number of pages24
JournalInternational Economic Review
Volume38
Issue number2
DOIs
StatePublished - May 1997
Externally publishedYes

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