Your Textbook Used a Distributed Lag Model with Only Current $Y _ { t } = \beta _ { 0 } + \beta _ { 1 } X _ { t } + u _ { t }$

question 28

Essay

Your textbook used a distributed lag model with only current and past values of Xt-1
coupled with an AR(1)error model to derive a quasi-difference model, where the error
term was uncorrelated. (a) Instead use a static model $Y _ { t } = \beta _ { 0 } + \beta _ { 1 } X _ { t } + u _ { t }$ here, where the error term follows an AR(1). Derive the quasi difference form. Explain why in the case of the infeasible GLS estimators you could easily estimate the $\beta s$ by OLS.

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Definitions:

Dummy Row

A placeholder or artificial row added to a table or dataset, often used in programming and data analysis to facilitate certain operations.

Minimum Cost

The least possible expenditure required to achieve a particular objective or the production of goods and services.

Transportation Problem

A type of optimization problem in operations research that involves finding the most cost-effective way to distribute products from several suppliers to multiple consumers.

Supply

The total amount of a product or service available for purchase at any given time.