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Understanding Distributed-Lag Models

1. A distributed-lag model includes lagged (past) values of explanatory variables, while an autoregressive model includes lagged values of the dependent variable. 2. Autoregressive models are also known as dynamic models as they show the relationship between a dependent variable and its past values over time. 3. Distributed-lag models can include a finite number of lag periods, with coefficients representing the short-run, interim, and long-run effects on the dependent variable.

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Yasir Irfan
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213 views1 page

Understanding Distributed-Lag Models

1. A distributed-lag model includes lagged (past) values of explanatory variables, while an autoregressive model includes lagged values of the dependent variable. 2. Autoregressive models are also known as dynamic models as they show the relationship between a dependent variable and its past values over time. 3. Distributed-lag models can include a finite number of lag periods, with coefficients representing the short-run, interim, and long-run effects on the dependent variable.

Uploaded by

Yasir Irfan
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© Attribution Non-Commercial (BY-NC)
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Chapter 17 1.

If the regression model includes the lagged (past) values of the explanatory variables (the Xs), it is called a distributed-lag model. (Yt= + 0Xt+ 1Xt1+ 2Xt2+ ut) 2. If the model includes one or more lagged values of the dependent variable among its explanatory variables, it is called an autoregressive model. (Yt= + Xt+ Yt1+ ut) 3. Autoregressive is also known as dynamic models since they portray the time path of the dependent variable in relation to its past value(s). 4. A lapse of time is called a lag.

5.

6. Distributed-lag model with a finite lag of k time periods. Yt= + 0Xt+ 1Xt1+ 2Xt2+ + kXtk+ ut 7. The coefficient 0 is known as the short-run, or impact, multiplier because it gives the change in the mean value of Y following a unit change in X in the same time period. 8. For constant X, (0+ 1+ 2 and so on) gives the change in (the mean value of) Y in next periods. These partial sums are called interim, or intermediate, multipliers. 9. After k periods we obtain i= 0+ 1+ 2+ + k= which is known as the long-run, or total, distributed-lag multiplier, provided the sum exists. 10.

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