Nominal Rigidities and News-Driven Business Cycles in a Medium-Scale DSGE Economy
AbstractA 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.
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Bibliographic InfoPaper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 10061.
Length: 11 pages
Date of creation: Dec 2010
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-12-11 (All new papers)
- NEP-CBA-2010-12-11 (Central Banking)
- NEP-DGE-2010-12-11 (Dynamic General Equilibrium)
- NEP-MAC-2010-12-11 (Macroeconomics)
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