Jorgenson's Rational Lag Model:
'The model outlined in can also be obtained using Jorgenson's rational lag approach. Jorgenson's approach is essentially a generalization of the Koyck model. The objective is to add lagged dependent and independent variables and let the parameters of the system and disturbance dynamics differ. In order to achieve this Jorgenson suggested the following model:
Here, A(L) and B(L) are polynomials in the lag operator. Consider a simple example where
