Consider the Following Distributed Lag Model Is Serially Uncorrelated,and

question 5

Essay

Consider the following distributed lag model is serially uncorrelated,and X is strictly exogenous.
(a)How many parameters are there to be estimated between the two equations?
(b)Using the two equations of the model above,derive the ADL form of the model.
(c)There are five regressors in the ADL model,namely Yt-1,Xt,Xt-1,Xt-2 and the constant.Estimating the ADL model linearly will give you five coefficients.Can you derive the parameters of the original two equation model from these five estimates? Why or why not?
(d)What alternative method do you have to retrieve the parameters of the two equation model?

---

Definitions:

Payroll Taxes

Taxes imposed on employers and employees, based on the wages and salaries paid to workers, used to fund social security and healthcare services.

Negative Externality

A cost that affects a party who did not choose to incur that cost, often resulting from industrial activity, where the negative effects are felt by others, such as pollution.

Public Good

A product that is non-excludable and non-rivalrous, meaning it can be used by many simultaneously without diminishing the product's availability to others.

Private Good

A good, such as pizza, that is both rival in consumption and exclusive.