Hi everyone,

Firstly, thank you all for the support, I have been reading for a while and it is incredible the effort you put on it.

I would like to ask something that I have already seen in the forum but it is still quite not clear to me.

Let us suppose that I obtain the IRF from a model, let us say a simple baseline NK model, without trend or permanent shocks.

Let us now suppose that I want to compare the IRF of the model with those obtained by a SVAR (with identification coming from the restrictions implied from the model). The original data are not stationary and in order to get the IRF from the data, I apply either a log-difference or a difference of levels (depending on the variable). Of course, once I have the empirical IRF in difference I also can obtain the ones in levels (it is enough to cumulate the IRF).

Now, which of the two do I have to compare with those obtained from the theoretical model?

Intuitively I would say that I have to compare those in difference. However, in this case, it seems to me that I would compare the IRF showing the response of, let us take a variable, “output” (for the model) with the IRF showing the response of “output growth” (for the SVAR), given that the transformation of the log-difference data “output” delivers me the “output growth”. From this perspective, I should then compare the model IRF of output coming from the model with the “levels” IRF of output coming from SVAR.

Thank you in advance