Illustration Of The Almon Distributedlag Model

To illustrate the Almon technique, Table 17.6 gives data on inventories Y and sales X for the United States for the period 1954-1999.

For illustrative purposes, assume that inventories depend on sales in the current year and in the preceding 3 years as follows:

Yt = a + ßoXt + ßi Xt-i + ß2 Xt-2 + ß3Xt-3 + ut (17.13.11)

Furthermore, assume that ß, can be approximated by a second-degree polynomial as shown in (17.13.2). Then, following (17.13.5), we may write where

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