Advanced Search
MyIDEAS: Login to save this paper or follow this series

Assessing DSGE model nonlinearities

Contents:

Author Info

  • S. Boragan Aruoba
  • Luigi Bocola
  • Frank Schorfheide

Abstract

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.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.philadelphiafed.org/research-and-data/publications/working-papers/2013/wp13-47.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number 13-47.

as in new window
Length:
Date of creation: 2013
Date of revision:
Handle: RePEc:fip:fedpwp:13-47

Contact details of provider:
Postal: 10 Independence Mall, Philadelphia, PA 19106-1574
Web page: http://www.philadelphiafed.org/
More information through EDIRC

Order Information:
Email:
Web: http://www.phil.frb.org/econ/wps/index.html

Related research

Keywords: Wages ; Prices ; Inflation (Finance) ; Nonlinear theories ; Time-series analysis;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. S. Borağan Aruoba & Pablo Cuba-Borda & Frank Schorfheide, 2013. "Macroeconomic Dynamics Near the ZLB: A Tale of Two Countries," NBER Working Papers 19248, National Bureau of Economic Research, Inc.
  2. Yongsung Chang & Taeyoung Doh & Frank Schorfheide, 2007. "Non-stationary Hours in a DSGE Model," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 39(6), pages 1357-1373, 09.
  3. Nason, James M & Cogley, Timothy, 1994. "Testing the Implications of Long-Run Neutrality for Monetary Business Cycle Models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 9(S), pages S37-70, Suppl. De.
  4. Kim, Jinill & Ruge-Murcia, Francisco J., 2007. "How Much Inflation is Necessary to Grease the Wheels?," Cahiers de recherche, Universite de Montreal, Departement de sciences economiques 2007-10, Universite de Montreal, Departement de sciences economiques.
  5. Gust, Christopher & López-Salido, J David & Smith, Matthew E, 2012. "The Empirical Implications of the Interest-Rate Lower Bound," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9214, C.E.P.R. Discussion Papers.
  6. Alessandro Barattieri & Susanto Basu & Peter Gottschalk, 2010. "Some evidence on the importance of sticky wages," Working Papers, Federal Reserve Bank of Boston 10-11, Federal Reserve Bank of Boston.
  7. Dolado, Juan J. & María-Dolores, Ramón & Ruge-Murcia, Francisco J., 2002. "Non-Linear Monetary Policy Rules: Some New Evidence for the US," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3405, C.E.P.R. Discussion Papers.
  8. Lawrence J. Christiano & Martin Eichenbaum & Charles Evans, 2001. "Nominal rigidities and the dynamic effects of a shock to monetary policy," Proceedings, Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco, issue Jun.
  9. Allan D. Brunner, 1994. "On the dynamic properties of asymmetric models of real GNP," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 489, Board of Governors of the Federal Reserve System (U.S.).
  10. Peter Gottschalk, 2005. "Downward Nominal-Wage Flexibility: Real or Measurement Error?," The Review of Economics and Statistics, MIT Press, MIT Press, vol. 87(3), pages 556-568, August.
  11. Liudas Giraitis & Peter Robinson & Donatas Surgailis, 2000. "A model for long memory conditional heteroscedasticity," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 2103, London School of Economics and Political Science, LSE Library.
  12. Hong Lan & Alexander Meyer-Gohde, 2011. "Solving DSGE Models with a Nonlinear Moving Average," SFB 649 Discussion Papers, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany SFB649DP2011-087, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  13. Ríos-Rull, José-Víctor & Schorfheide, Frank & Fuentes-Albero, Cristina & Kryshko, Maxym & Santaeulàlia-Llopis, Raül, 2012. "Methods versus substance: Measuring the effects of technology shocks," Journal of Monetary Economics, Elsevier, Elsevier, vol. 59(8), pages 826-846.
  14. Christopher A. Sims & Tao Zha, 2004. "Were there regime switches in U.S. monetary policy?," Working Paper, Federal Reserve Bank of Atlanta 2004-14, Federal Reserve Bank of Atlanta.
  15. Rabanal, Pau & Rubio-Ramirez, Juan F., 2005. "Comparing New Keynesian models of the business cycle: A Bayesian approach," Journal of Monetary Economics, Elsevier, Elsevier, vol. 52(6), pages 1151-1166, September.
  16. Smith, A A, Jr, 1993. "Estimating Nonlinear Time-Series Models Using Simulated Vector Autoregressions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 8(S), pages S63-84, Suppl. De.
  17. McKay, Alisdair & Reis, Ricardo, 2006. "The Brevity and Violence of Contractions and Expansions," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5756, C.E.P.R. Discussion Papers.
  18. Canova, Fabio, 1994. "Statistical Inference in Calibrated Models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 9(S), pages S123-44, Suppl. De.
  19. Christophe Andrieu & Arnaud Doucet & Roman Holenstein, 2010. "Particle Markov chain Monte Carlo methods," Journal of the Royal Statistical Society Series B, Royal Statistical Society, Royal Statistical Society, vol. 72(3), pages 269-342.
  20. Liudas Giraitis & Peter M. Robinson & Donatas Surgailis, 2000. "A model for long memory conditional heteroscedasticity," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 299, London School of Economics and Political Science, LSE Library.
  21. Abbritti, Mirko & Fahr, Stephan, 2013. "Downward wage rigidity and business cycle asymmetries," Journal of Monetary Economics, Elsevier, Elsevier, vol. 60(7), pages 871-886.
  22. S. Boragan Aruoba & Frank Schorfheide, 2013. "Macroeconomic dynamics near the ZLB: a tale of two equilibria," Working Papers, Federal Reserve Bank of Philadelphia 13-29, Federal Reserve Bank of Philadelphia.
  23. Engle, Robert F & Lilien, David M & Robins, Russell P, 1987. "Estimating Time Varying Risk Premia in the Term Structure: The Arch-M Model," Econometrica, Econometric Society, Econometric Society, vol. 55(2), pages 391-407, March.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. S. Borağan Aruoba & Pablo Cuba-Borda & Frank Schorfheide, 2013. "Macroeconomic Dynamics Near the ZLB: A Tale of Two Countries," NBER Working Papers 19248, National Bureau of Economic Research, Inc.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:fip:fedpwp:13-47. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Beth Paul).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.