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Dynamic models are characterized by the fact that their relations contain variables which belong to different points in time. It is thought that in order to model how the data is generated, time lags must generally be included in the relations of an economic model. Each relation incorporates a lag distribution function which describes how the lagged independent variable affects the dependent variable over time.
KeywordsExogenous Variable Endogenous Variable Econometric Model Bivariate Case Identification Regime
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