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st: PDL

From   Kit Baum <[email protected]>
To   [email protected]
Subject   st: PDL
Date   Wed, 6 Sep 2006 09:02:19 -0400

Amaranta said, in re PDL ("Almon") lags:

Thanks so much, now I have the article.
But a question remains open: How to choose
the order of the polynomial to
represent the lag weights?
In the article it is just assumed.

The order of a PDL, relative to the lag length, indicates the strength of constraints placed on an unrestricted DL specification. I.e. 12 lags would require 12 coefficients, unconstrained, but only three if a 2d order PDL is fit (depending on endpoint constraints). A 3d order PDL would be less restrictive. As a 2d degree polynomial can have only one inflection point, this restricts the shape of lags you can get from a quadratic PDL. A cubic allows two inflection points, and so on. It would probably be sensible to apply a relatively high order PDL (not imposing many constraints on the DL form) and then "test down" to a more parsimonious degree if the data are compliant.

Kit Baum, Boston College Economics
An Introduction to Modern Econometrics Using Stata:

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