An innovation in this paper is to introduce a time-to-build technology for the production of market capital into a model with home production. The paper’s main finding is that the two anomalies that have plagued all household production models—the positive correlation between business and...

Real business cycle models have difficulty replicating the volatility of S&P 500 returns. This fact should not be surprising since real business cycle theory suggests that the return to capital should be measured by the return to aggregate market capital, not stock market returns. We construct a...

Calibration has become a standard tool of macroeconomics. This paper extends and refines the calibration methodology along several important dimensions. First, accounting for home production is important both in measuring calibration targets and in organizing the data in a model-consistent...

The paper documents how cyclical fluctuations in market work vary over the life cycle and then assesses the predictions of a life-cycle version of the growth model for those observations. The analysis yields a simple but striking finding. The main discrepancy between the model and that data lies...

Evolutionary programming is a stochastic optimization procedure that has proved useful in optimizing difficult functions. This paper shows that evolutionary programming can be used to solve the Bellman equation problem with a high degree of accuracy and substantially less CPU time than Bellman...

Revised. This paper investigates the role of beliefs over monetary policy in propagating the effects of monetary policy shocks within the context of a dynamic, stochastic general equilibrium model. In this model, monetary policy periodically switches between low- and high-money-growth regimes....