INTERNATIONAL-BUSINESS CYCLES, FINANCIAL-MARKETS AND HOUSEHOLD PRODUCTION

This paper investigates the properties of an international real busine ss cycle model with household production. We show that a model with di sturbances to both market and household technologies reproduces the ma in regularities of the data and improves existing models in matching i nternational consumption, investment and output correlations without i rrealistic assumptions on the structure of international financial mar kets. Sensitivity analysis shows the robustness of the results to alte rnative specifications of the stochastic processes for the disturbance s and to variations of unmeasured parameters within a reasonable range . (C) 1998 Published by Elsevier Science B.V. All rights reserved.