An Equilibrium Model of theBusiness Cycle With HouseholdProduction and

We estimate a dynamic general equilibrium model of the U.S. economy that includes an explicit household production sector and stochastic scal variables. We use our estimates to investigate two issues. First, we analyze how well the model accounts for aggregate uctuations. We nd that household production has a signi cant impact and reject a nested speci cation in which changes in the home production technology do not matter for market variables. Second, we study the e ects of some simple scal policy experiments and show that the model generates di erent predictions for the e ects of tax changes than similar models without home production.