Distributed Lag Models

In economics, the present value of the dependent variable often depends on the past values of the explanatory variables. In other words, the influence of the explanatory variables is only exerted after a certain lag. This chapter deals with a particular class of such dynamic models, namely, distributed lag models, which include present and lagged values of explanatory variables. It presents the different types of distributed lag models and their estimation methods. It also describes the autoregressive distributed lag (ARDL) models in which the lagged values of the dependent variable are added to the present and past values of the “usual” explanatory variables in the set of explanatory variables. Various empirical applications are provided to illustrate the different concepts.