Hello all!
How does one interpret second order impulse response functions? I allow shocks to the risk aversion parameter and then compare the second order IRFs, but I’m not certain how to interpret them.
Thanks!
What exactly do you mean? Them being wiggly? If you don’t use IRFs at the stochastic steady state, you need a very high simul_replic. See e.g. IRFs value depend on number of periods - #2 by jpfeifer