Assessing DSGE Model Nonlinearities / S. Borağan Aruoba, Luigi Bocola, Frank Schorfheide.

Format:

Book

Author/Creator:

Aruoba, S. Borağan.

Contributor:

National Bureau of Economic Research.

Bocola, Luigi.

Schorfheide, Frank.

Series:

Working Paper Series (National Bureau of Economic Research) no. w19693.

NBER working paper series no. w19693

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2013.

Summary:

We develop a new class of nonlinear time-series models to identify nonlinearities in the data and to evaluate nonlinear DSGE models. U.S. output growth and the federal funds rate display nonlinear conditional mean dynamics, while inflation and nominal wage growth feature conditional heteroskedasticity. We estimate a DSGE model with asymmetric wage/price adjustment costs and use predictive checks to assess its ability to account for nonlinearities. While it is able to match the nonlinear inflation and wage dynamics, thanks to the estimated downward wage/price rigidities, these do not spill over to output growth or the interest rate.

Notes:

Print version record

December 2013.