Essay
Consider the impulse response functions generated using the Smets and Wouters (2007) DSGE model, in response to a shock to productivity (TFP) and government expenditures as shown in Figures 15.8 and 15.9. The endogenous variables are consumption (c), inflation (pinf), labor supply (lab), and GDP (y). Briefly discuss the results of the simulations using macroeconomic theory.
Figure 15.8: Impulse Response Function to a Change in Productivity 
Figure 15.9: Impulse Response Function to a Change in Government Spending 
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The first set of impulse response functi...View Answer
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