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From |
Kit Baum <baum@bc.edu> |

To |
statalist@hsphsun2.harvard.edu |

Subject |
re: st: ldv when the dv is first-differenced: d.variable and l.variable |

Date |
Mon, 16 Mar 2009 09:35:04 -0400 |

<> Sorry for the previous subject line. On Mar 16, 2009, at 02:33 , Carlos wrote:

If the dependent variable is first-differenced (i.e, change in unemployment -I'm using the d.variable command) and one would like to control for the lagged dependent variable on the right-hand side of the regression, should one lag the "first-differenced variable" (i.e, lagged change in unemployment) or should one lag the level variable (lagged unemployment -using the time-series command l.variable). To be clearer say you have: d.unemployment = dependent variable Should one use "l.unemployment" as the Lagged DV in the right-hand side or should one lagged the first-differenced variable?

D.x = alpha + beta L.x + eps implies x_t = alpha + (1+beta) x_t-1 + eps

In the other case, D.x = alpha + beta LD.x + eps implies x_t = alpha + (1+beta) x_t-1 - beta x_t-2 + eps

Kit Baum | Boston College Economics and DIW Berlin | http://ideas.repec.org/e/pba1.html An Introduction to Stata Programming | http://www.stata-press.com/books/isp.html An Introduction to Modern Econometrics Using Stata | http://www.stata-press.com/books/imeus.html * * For searches and help try: * http://www.stata.com/help.cgi?search * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/

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