Consider the distributed lag model Yt = β0 + β1Xt + β2Xt-1 + β3Xt-2 + … + βr+1Xt-r + ut.The dynamic causal effect is
A)β0 + β1
B)β1 + β2+…+βr+1
C)β0 + β1+…+βr+1
D)β1

Question

Quizplus · Accepted Answer

The dynamic causal effect is the sum of the coefficients of the lagged values of the independent variable, which in this case is X. Therefore, the correct answer is the sum of β1 to βr+1, which is choice B.

Consider the Distributed Lag Model Yt = β0 + β1Xt