The Distributed Lag Model Relating Orange Juice Prices to the Orlando

question 4

Essay

The distributed lag model relating orange juice prices to the Orlando weather reported in the text was of the form
%ChgPt = β0 + β1FDDt + β2FDDt-1 + β3FDDt-2 + ...+ β19FDDt-18 + ut
(a)Suppose that an agricultural economist tells you that a freeze in December is more harmful than a freeze in the other months.How would you modify the regression to incorporate this effect? How would you test for this December effect?
(b)The same economist tells you that the damage caused by freezes is not well captured by the FDD variable.She says that a single day temperature with a temperature of 24° is more damaging than 8 days with a temperature of 31°.How would you modify the regression to incorporate this effect?

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Definitions:

Ammonia

A compound of nitrogen and hydrogen (NH3) that is a colorless gas with a pungent smell, used widely in industry and produced naturally in the body as a byproduct of amino acid metabolism.

Bicarbonate Ions

A negatively charged ion that acts as a significant component of the bicarbonate buffer system, helping to maintain pH balance in blood and other bodily fluids.

Phosphate Ions

Negatively charged ions (PO4^3-) that play crucial roles in biological processes such as energy transfer and cellular regulation.

Sensible Perspiration

Perspiration excreted by the sweat glands that appears as moisture on the skin; produced in large quantity when there is much humidity in the atmosphere.