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Nominal Rigidities, News-Driven Business Cycles, and Monetary Policy

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  • Kobayashi Keiichiro

    (Hitotsubashi University and the Research Institute of Economy, Trade and Industry)

  • Nutahara Kengo

    (Senshu University)

Abstract

A news-driven business cycle is a positive comovement in consumption, labor, investment, and output caused by positive news about the future. Standard real business cycle models do not generate it. In this paper, we find that a used market friction - i.e., sticky prices - can be a source of news-driven business cycles from news about future technology growth, technology level, and expansionary monetary policy shocks. The key mechanism is the countercyclical movements of markups through nominal rigidities.

Suggested Citation

  • Kobayashi Keiichiro & Nutahara Kengo, 2010. "Nominal Rigidities, News-Driven Business Cycles, and Monetary Policy," The B.E. Journal of Macroeconomics, De Gruyter, vol. 10(1), pages 1-26, September.
    • Handle: RePEc:bpj:bejmac:v:10:y:2010:i:1:n:24
    DOI: 10.2202/1935-1690.2094
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Christoph Görtz & John D. Tsoukalas, 2013. "Sector Specific News Shocks in Aggregate and Sectoral Fluctuations," CESifo Working Paper Series 4269, CESifo.
    2. Stéphane Auray & Paul Gomme & Shen Guo, 2013. "Nominal Rigidities, Monetary Policy and Pigou Cycles," Economic Journal, Royal Economic Society, vol. 0, pages 455-473, May.
    3. Winkler, Fabian, 2020. "The role of learning for asset prices and business cycles," Journal of Monetary Economics, Elsevier, vol. 114(C), pages 42-58.
    4. Görtz, Christoph & Tsoukalas, John, 2011. "News and financial intermediation in aggregate and sectoral fluctuations," MPRA Paper 40442, University Library of Munich, Germany, revised Jul 2012.
    5. Nutahara, Kengo, 2010. "Note on nominal rigidities and news-driven business cycles," MPRA Paper 24112, University Library of Munich, Germany.
    6. Christoph Gortz & John D. Tsoukalas, 2013. "Learning, Capital Embodied Technology and Aggregate Fluctuations," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(4), pages 708-723, October.
    7. Guo Shen, 2011. "News Shocks and the External Finance Premium," The B.E. Journal of Macroeconomics, De Gruyter, vol. 11(1), pages 1-27, December.
    8. Stephane Auray & Paul Gomme & Shen Guo, 2012. "Nominal Rigidities, Monetary Policy and Pigou Cycles: On-line Appendix," Working Papers 12007, Concordia University, Department of Economics.
    9. Thales A. J. T. T. Maion & Marcio Issao Nakane, 2019. "News shocks and consumer expectations: evidence for Brazil," Working Papers, Department of Economics 2019_11, University of São Paulo (FEA-USP).
    10. Nutahara, Kengo, 2010. "Internal and external habits and news-driven business cycles," Economics Letters, Elsevier, vol. 107(2), pages 300-303, May.
    11. Deniz Nebioğlu, 2022. "Great Recession and news shocks: evidence based on an estimated DSGE model," Empirical Economics, Springer, vol. 62(4), pages 1649-1685, April.
    12. Ko, Jun-Hyung & Miyazawa, Kensuke & Vu, Tuan Khai, 2012. "News shocks and Japanese macroeconomic fluctuations," Japan and the World Economy, Elsevier, vol. 24(4), pages 292-304.
    13. Juelsrud, Ragnar E. & Wold, Ella Getz, 2019. "The Saving and Employment Effects of Higher Job Loss Risk," Working Paper 2019/17, Norges Bank.

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    More about this item

    Keywords

    news-driven business cycles; nominal rigidities; sticky prices;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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