Lagged Dependent variables What if there are unobserved variables and you cant find reasonable proxy variables? o May be possible to include a lagge d dependent variable to account for omitted variables that contribute to both past and current levels of y e Obviously, you must think past and current y are related for this to make sense Economics 20- Prof andersonEconomics 20 - Prof. Anderson 11 Lagged Dependent Variables What if there are unobserved variables, and you can’t find reasonable proxy variables? May be possible to include a lagged dependent variable to account for omitted variables that contribute to both past and current levels of y Obviously, you must think past and current y are related for this to make sense