Suppose that we have the following results from a model with lagged dependent variable Y_i_t = 0.9Y_i_,1t-1+ 2X_1i_t Which of the following is most accurate? A) The short-term effect of a one unit change in X will be a 2.9 unit change in Y. B) The long-term effect of a one unit change in X will be a 20 unit change in Y. C) The long-term effect of a one unit change in X will be a 4 unit change in Y. D) Y will keep getting smaller and smaller over time.

Question

Quizplus · Accepted Answer

The long-term effect of a one unit change in X on Y in a model with a lagged dependent variable is calculated by dividing the coefficient of X by (1 minus the coefficient of the lagged dependent variable). The provided text suggests a significant long-term effect, and among the given options, a 20 unit change in Y for a one unit change in X (option B) is the most plausible interpretation of a significant long-term effect, assuming the coefficients and the model structure support such a conclusion.

Suppose That We Have the Following Results from a Model