Author(s)

Kengo Nutahara

Department of Economics, Senshu University, Tokyo, Japan.

A news-driven business cycle is a positive comovement of consumption, output, labor, and investment from the news about the future. We show that nominal rigidities, especially sticky prices, can cause it in a medium-scale DSGE economy through countercyclical movements of the price-markup. We also find that sticky wages cannot generate it, but they amplify the effects of news shocks.

Nominal Rigidities; News-Driven Business Cycles

K. Nutahara, "Note on Nominal Rigidities and News-Driven Business Cycles," Theoretical Economics Letters, Vol. 2 No. 5, 2012, pp. 431-434. doi: 10.4236/tel.2012.25079.