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DP1113 | Household Production and International Business Cycles

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This paper investigates the effects of introducing household production in an international real business cycle model. We show how a model driven by disturbances to the household production can account for some features of international cycles. A version of the model which considers shocks to both market and household technologies seems able to reproduce the main regularities of the data. Sensitivity analysis shows that the implications of the model are robust to alternative specifications of the stochastic processes for the disturbances and to variations of the parameters within a reasonable range.