In Eview, while estimating ARDL for panel data, it generates coefficients for long and short-run.
what does it mean by long run and short run??
I mean what is time duration for short run?
Please refer to the article
"Long-Run Effects in Large Heterogenous Panel Data Models with Cross-Sectionally Correlated Errors"
at
https://www.dallasfed.org/assets/documents/institute/wpapers/2015/0223.pdf
In the short-run, capital is fixed. In the long-run, it is not. So the short-run is, in a sense, a gestation period. How long does it take to make more capital? But then, suppose that the adjustment is protracted for some reason and takes multiple short-runs to fully adjust. Then the answer is more complicated. Why would adjustment take multiple periods? It could be that costs of adjustment depend on the speed of adjustment.
In the lectures during my studies, I learnt that the definition for the short- run analysis is up to two years , whereas long-run analysis takes at least ten years.
I remind you the microeconomic theory about short and long-run. but in the practice you must no have problems because the software uses short and long run. When you use short-run you must examine the residuals because they do not have good properties (homocedatiscity, etc)
Here 'long run' refers to the long-run solution of the ARDL model. The 'long-run coefficients' are the coefficients in the long-run solution.
The model can then be reparameterised as
Dy_t = ECM + lagged values of Dy_t and Dx_t + error term,
where ECM is the error correction mechanism. The short-run coefficients are those on Dy_t and Dx_t.
A standard reference is Hendry, Pagan and Sargan (1984):
http://dx.doi.org/10.1016/S1573-4412(84)02010-9
In the context of dynamic models the question "How long do we wait for the long run?" does not have a simple answer because "long run" for such models is an imaginary situation in which any exogenous variables have been constant for so long that the system has settled down to a constant solution for the endogenous variables (or constant expected value if you permit random disturbances.)
In the non-imaginary world exogenous variables typically do not remain constant and there are random disturbances. The implication is that the endogenous variables of a dynamic system may never actually attain the values given by the long run solution. Nevertheless, it is important to know whether a long run solution exists and whether the dynamics are stable because under those conditions it can be argued that the system cannot move infinitely far from its long run equilibrium.
Your question can be turned into one that has an answer by defining the short run as the time taken for a shock to be mostly forgotten. For example, you could ask "How long does it take for (say) 90% of a shock to be forgotten?".
The short run result is the estimated dynamic equation which involves possibly lags of the dependent, and current and lags of the independent variables.
The long run result is got by assuming that the system is in equilibrium. At this equilibrium the dependent and independent variables are constant, Substitute some constant value for yt say y and similarly the same y for each lag of y. Similarly substitute x for each xt and lags. Now you have an equation betwen tte y and the x's. Simplify this and you have the long run.
For example Consider the simple short-run dynamic system.
yt = b1yt-1 + a0xt + a1xt-1. To get the long run assume that y and x are the equilibrium values. Then
y = b1y+ a0 x+ a1 x which gives a long run solution of
y = (a0 + a1)/(1 - b1) x.
There is no particular time length defined for the long and short run. By analysing the dynamics you may estimated the speed at whichthe long.runis approached in any particular case.
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