Note on nominal rigidities and news-driven business cycles

Nutahara, Kengo (2010): Note on nominal rigidities and news-driven business cycles.

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 an estimated medium-scale DSGE economy.

• Item Type: MPRA Paper
• Language: English
• Keywords: nominal rigidities ; news-driven business cycles
• Subjects: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E21 - Consumption ; Saving ; Wealth

References

Beaudry, P., and F. Portier, 2004, An exploration into Pigou's theory of cycles, Journal of Monetary Economics 51, 1183--1216.

Christiano, L.J., C. Ilut, R. Motto, and M. Rostagno, 2007, Monetary policy and stock market boom-bust cycles, European Central Bank Working paper Series 955.

Fujiwara, I., Y. Hirose, and M. Shintani, 2008, Can news be a major source of aggregate fluctuations? A Bayesian DSGE approach, IMES Discussion Paper No.2008-E-16, Bank of Japan.

Jaimovich, N., and S. Rebelo, 2008,News and business cycles in open economies, Journal of Money, Credit and Banking 40, 1699--1711.

Jaimovich, N., and S. Rebelo, 2009, Can news about the future drive the business cycle? American Economic Review 99, 1097--1118.

Kobayashi, K., T. Nakajima, and M. Inaba, 2007, Collateral constraint and news-driven cycles, RIETI Discussion Paper 07--E--013.

Kobayashi, K. and K. Nutahara, 2008, Nominal rigidities, news-driven business cycles, and monetary policy, RIETI Discussion Paper 08--E--018.

Nutahara, K. 2009, Internal and external habits and news-driven business cycles, forthcoming in Economics Letters.

Schmitt-Groh\'e, S. and M. Uribe, 2008, What's news in business cycles?, NBER Working Paper 14215.

Smets, F. and R. Wouters, 2007, Shocks and frictions in US business cycles: A Bayesian DSGE approach, American Economic Review 97, 586--606.