Models with lags:

Let us consider a simple model with one explanatory variable,

where, Y may be investment expenditure and X may be sales figures. This is a very simple model that postulates a lagged response, but one that appears only  in  period  t and is fully complete within  that period. Sales of time  t -  6 do not impact investment expenditures in  period  t -1  or t+l, they only affect investment in period t.  In practice it is often the case that an event's impact may be felt for several time periods.