Nominal rigidities, news-driven business cycles, and monetary policy

Keiichiro Kobayashi, Kengo Nutahara

Research output: Contribution to journalArticlepeer-review

6 Citations (Scopus)


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.

Original languageEnglish
Article number24
JournalB.E. Journal of Macroeconomics
Issue number1
Publication statusPublished - 2010


  • news-driven business cycles
  • nominal rigidities
  • sticky prices

ASJC Scopus subject areas

  • Economics and Econometrics


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