Dynamic unobserved effects model

<p>A dynamic unobserved effects model is a <a href="/facts/Statistical_model/jKkT5ftm">statistical model</a> used in <a href="/facts/Econometrics/7U52gzHt">econometrics</a> for <a href="/facts/Panel_analysis/lk2LMm6b">panel analysis</a>. It is characterized by the influence of previous values of the <a href="/facts/Dependent_variable/dINfzIF2">dependent variable</a> on its present value, and by the presence of unobservable <a href="/facts/Explanatory_variable/dINfzIF2">explanatory variables</a>.
</p><p>The term “dynamic” here means the dependence of the dependent variable on its past history; this is usually used to model the “state dependence” in economics. For instance, for a person who cannot find a job this year, it will be harder to find a job next year because her present lack of a job will be a negative signal for the potential employers. “Unobserved effects” means that one or some of the explanatory variables are unobservable: for example, consumption choice of one flavor of ice cream over another is a function of personal preference, but preference is unobservable.
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Dynamic unobserved effects model open-in-new

Dynamic unobserved effects model