In this letter we focus on the econometrics of the geometric distributed lag model, after application of the so-called Koyck transformation. The Koyck transformation entails a parameter restriction, which should not be overlooked for reasons of estimation efficiency. Furthermore, the t statistic for the parameter for direct effects has a non-standard distribution. We provide solutions to these two issues.

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Econometric Institute Reprint Series
Economics Letters
Erasmus Research Institute of Management

Franses, P. H., & van Oest, R. (2007). On the econometrics of the geometric lag model. Economics Letters, 95(2), 291–296. doi:10.1016/j.econlet.2006.10.023