Assessing DSGE Model Nonlinearities
          
                  S. Boragan Aruoba, Luigi Bocola and Frank Schorfheide
      
  
, 
            Working Paper
      
            February
      
            2014
          
                          
      
  
  Abstract
              We develop a new class of time series models to identify nonlinearities in the data and to evaluate 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 and price adjustment costs and use predictive checks to assess its ability to account for nonlinearities.