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The Distributed Lag Model Relating Orange Juice Prices to the Orlando

Question 33

Essay

The distributed lag model relating orange juice prices to the Orlando weather reported in
the text was of the form %ChgPt=β0+β1FDDt+β2FDDt1+β3FDDt2++β19FDDt18+ut\% C h g P _ { t } = \beta _ { 0 } + \beta _ { 1 } F D D _ { t } + \beta _ { 2 } F D D _ { t - 1 } + \beta _ { 3 } F D D _ { t - 2 } + \ldots + \beta _ { 19 } F D D _ { t - 18 } + u _ { t } (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?

Correct Answer:

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An additional regressor (TempFreeze)can ...

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