TITLE:
Note on Nominal Rigidities and News-Driven Business Cycles
AUTHORS:
Kengo Nutahara
KEYWORDS:
Nominal Rigidities; News-Driven Business Cycles
JOURNAL NAME:
Theoretical Economics Letters,
Vol.2 No.5,
December
19,
2012
ABSTRACT: 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.