Hi guys. I really do not know if i can ask this question here. It is not
about a grtetl but about time series.
I am reading book of Vogelang "Econometrics Theory and Applications with
EViews. In chapter 12 he show how to estimate long run models with lag
operator and in the end of each example he always assume that L=1 and
estimate really easily the final model. I can not understand why he assume
that L is equeal to one and not to something else.
For example
Y_t=C(0)+C(1)*G_t+c(2)*Y_t-1+e_t =>
(1-c(2)*L)*Y_t=c(0)+c(1)*G_t+e_t=>
Y_t=c(0)/(1-c(2)L)+c(1)G_t/(1-c(2)L)+e_t(1-c(2)L)
And here it is always obtained that L=1.
Could someone expain why L=1, please?
Thanks.