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

Kengo Nutahara

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: 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.

Pages: 11 pages
Date: 2010-12
New Economics Papers: this item is included in nep-cba, nep-dge and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:10061

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