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Note on Nominal Rigidities and News-Driven Business Cycles
Department of Economics, Senshu University, Tokyo, Japan
- 1 Department of Economics, Senshu University, Tokyo, Japan
Theoretical Economics Letters·Volume 02 (2012)·Pages 431–434·Published 19 December 2012·DOI10.4236/tel.2012.25079
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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.
KeywordsNominal RigiditiesNews-Driven Business Cycles
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