I have calculated an ARDL(24,36) model with 1 independent variable. The data is monthly, hence the inclusion of so many lags.
I am trying to calculate the interim multiplier (the cumulative effect at a given point in time) and the total long-run multiplier.
I have seen the latter formula given as (B0+B1)/(1-A1)
Where B0 is the coefficient on the independent variable at time t, B1 is the coefficient on the independent variable at t-1 and A1 is the coefficient on the dependent variable at t-1. However, this formula seems to be limited to ARDL(1,1) models.
In models with more than 1 lag, what is the interim multiplier at lag k and what is the total long-run multiplier?
Best Answer
For an ARDL(n,m) model using your notation the multiplier is given by:
$\frac{\sum_{i=0}^mb_i}{1-\sum_{j=1}^na_j}$