Correlated Residuals in Lagged-Effects Models: What They (Do Not) Represent in the Case of a Continuous-Time Process
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The appeal of lagged-effects models, like the first-order vector autoregressive (VAR(1)) model, is the interpretation of the lagged coefficients in terms of predictive-and possibly causal-relationships between variables over time. While the focus in VAR(1) app... ...
