We develop a new class of nonlinear time-series models to identify nonlinear- ities 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 esti- mated downward wage/price rigidities, these do not spill over to output growth or the interest rate.
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