Abstract
This chapter discusses dynamic single-equation models. The distributed lag model described is entirely empirical, in that the form of the lag has no theoretical underpinning. It is assumed that the economic agent partially adjusts to the equilibrium values determined by static maximum (or minimum) conditions. The partial adjustment model has been widely used in the analysis of the demand for and the supply of particular commodities. Equilibrium values have to be determined for the stock. The rate of depreciation was supposed to be known, because there was no way to estimate it consistently with the other parameters of the model. The state variables are very difficult to measure, so that for most commodities, there are no statistical observations available.
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