Nominal Rigidities and News-Driven Business Cycles in a Medium-Scale DSGE Economy

Author Name NUTAHARA Kengo  (Senshu University)
Creation Date/NO. December 2010 10-E-061
Research Project Building a New Macroeconomic Model and Policies in Times of Economic Crisis
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A news-driven business cycle is a positive comovement of consumption, output, labor, and investment from the news about the future. It is well-known that the standard real business cycle model cannot generate it. In this paper, we show that nominal rigidities, especially sticky prices, can cause it in an estimated medium-scale DSGE economy. We also find that sticky wages cannot cause it in our economy.