Hello
During the learning process, I have a question.
Does the impulse response curve of y represents economic fluctuations or economic growth in the logarithmic-linearized DSGE model? And how to explain the meaning of impulse response curve of y?
Thank you.
If the model is stationary, then the IRFs represent fluctuations around trend because the model will always return back to steady state. What exactly does your second question refer to?
In DSGE model, if IRFs represent economic fluctuations, then why can DSGE models also be used to study economic growth?
You can use DSGE models for example for steady state transitions, but you would most probably not employ a linearized model for that and would not look at typical IRFs but rather simulations.
I’m very sorry, perhaps I was inaccurate in describing the problem. My question is whether the DSGE model is used to study economic fluctuations or economic growth?
DSGE models are a very broad modeling class. They can be used for many purposes. There is no general answer to your question.