Your Textbook Presents as an Example of a Distributed Lag

question 31

Essay

Your textbook presents as an example of a distributed lag regression the effect of the weather on the price of orange juice. The authors mention U.S. income and Australian exports, oil prices and inflation, monetary policy and inflation, and the Phillips curve as other potential candidates for distributed lag regression. You are considering estimating the effect of minimum wages on teenage employment (employment population ratio)using a time series of U.S. data. Write a short essay on whether a distributed lag model would be a suitable tool to figure out dynamic causal effects in this case.

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Definitions:

Real Wages

The purchasing power of wages, adjusted for inflation, indicating the quantity of goods and services that can be bought with a unit of labor.

CPI

Consumer Price Index, a measure that examines the weighted average of prices of a basket of consumer goods and services, used as an indicator of inflation.

Real Wages

Wages or salaries that have been adjusted for inflation, indicating the purchasing power of the income received by workers.

CPI

The Consumer Price Index is an indicator that calculates the weighted average price of a selection of consumer goods and services, including food, medical care, and transportation.