I know that the decision between a dynamic and static model is mostly based on underlying theory. However, my supervisor asked me to estimate both and thereby distinguish between short and long run effects.I´m using an gmm estimation with internal instruments due to endogenity concerns. Following my intuition the dynamic model estimates the short run effect on the dependent variable while the static model estimates the long run effects. Is that correct? I´ve been looking for studies talking about the difference but I haven'nt found any, most likely it is to simple. Any advice or paper recommendation would be great.
Best Jens
