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.
Moving one more period into the future, the effect on . y. t + 3. will be the same as the effect on . y. t + 2. because once again all of the . x. terms on the right-hand side are increased by one unit. The time path of the cumulative effects is shown in 3-4, with the cumulative effect Figure staying at 6.5 for all lags starting at 2.
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