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The Babadook: The Babadook itself IS real, but its a manifestation of Amelia's magic/power. The Babadook is typically accepted as a story about dealing with Grief and Trauma. The Babadook itself is often taken as metaphorical. Its all in Amelia's mind, as it were.

The movie's final scene suggests that the monster will always be around, but Amelia will learn how to deal with it and still live the life that she wants to live. The Babdook monster represents grief itself, which is a clever and moving metaphor.