Estimating ADL(p,q) models

Summary

• For an ADL( \(0,q\) ) (no lagged dependent variables) it may be possible to make the same GM assumptions as in the static model. OLS will then be unbiased, consistent and efficient.
• The stability conditions from AR( \(p)\) models carry over to ADL( \(p,q)\) models and they are necessary conditions for stationarity.
• For ADL( \(p,q\) ) with \(p≥1\) , the GM assumptions from the static model cannot be imposed.
• However, under reasonable assumptions, the OLS estimator and the standard errors can be shown to be consistent.