Transcription of CHAPTER 3 Distributed-Lag Models - Reed College
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CHAPTER 3 Distributed-Lag Models - Reed College
CHAPTER 3 Distributed-Lag Models A Distributed-Lag model is a dynamic model in which the effect of a regressor x on y occurs over time rather than all at once. In the simple case of one explanatory variable and a linear relationship, we can write the model as ()0,ttts tstsyLx uxu == + + = + + ( ) where ut is a stationary error This form is very similar to the infinite-moving-average representation of an ARMA process, except that the lag polynomial on the right-hand side is applied to the explanatory variable x rather than to a white-noise process . The individual coefficients s are called lag weights and the collectively comprise the lag distribution.
Chapter 3: Distributed-Lag Models 37 To see the interpretation of the lag weights, consider two special cases: a temporary we change in x and a permanent change in x.Suppose that x increases temporarily by one unit in period t, then returns to its original lower level for periods + 1 and all future periods.t For the temporary change, the time path of the changes in x looks like …
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