Is it possible to use lagged values of residuals?

Topics: IRIS in General, Models
Nov 20, 2014 at 4:24 PM
Let's say I have a transition equation such as

Variable_1 = Intercept + Beta1 * Variable_1{-1} + shock1;

When I attempt to change this to

Variable_1 = Intercept + Beta1 * Variable_1{-1} + Beta2shock1{-1} + shock1;

It doesn't allow me to write the equation this way.

How would you solve this?

Or, if you want to do a simple moving average model (X(t) = mu + residual(t) + beta
residual(t-1)), how would you achieve this?

Thanks,
Nov 20, 2014 at 4:26 PM
create transition variableshk1= shock1 and use its lagged values
Marked as answer by michaeljohnston on 11/20/2014 at 9:32 AM
Coordinator
Nov 20, 2014 at 4:32 PM
Edited Nov 20, 2014 at 4:32 PM
Yes, as you discovered you are not permitted to include lags of shocks. :) But it's not really a limitation since you can get around this with auxiliary variables, as ikarib pointed out a little more quickly than I could reply. For example,
!parameters
mu,beta

!transition_variables
x,ev

!transition_equations
x = mu + ev + beta*ev{t-1} ;
ev = e ;

!transition_shocks
e
Marked as answer by michaeljohnston on 11/20/2014 at 9:32 AM