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Lagrance-multiplier tersts for weak exogeneity: a synthesis

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  • H. Peter Boswijk
  • Jean-Pierre Urbain

Abstract

This paper unifies two seemingly separate approaches to test weak exogeneity in dynamic regression models with Lagrange-mulptiplier statistics. The first class of tests focuses on the orthogonality between innovations and conditioning variables, and thus is related to the Durbin-Wu-Hausman specification test. The second approach has been developed more recently in the context of context of cointegration and error correction models, ad concentrates on the question whether the conditioning variables display error correction behaviour. It is shown that the vital difference between the two approaches stems from the choice of the parmeters of interest. A new test is derived, which encompasses both its predecessors. The test is applied to an error correction model of the demand for money in Switzerland.

Suggested Citation

  • H. Peter Boswijk & Jean-Pierre Urbain, 1997. "Lagrance-multiplier tersts for weak exogeneity: a synthesis," Econometric Reviews, Taylor & Francis Journals, vol. 16(1), pages 21-38.
    • Handle: RePEc:taf:emetrv:v:16:y:1997:i:1:p:21-38
    DOI: 10.1080/07474939708800370
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    References listed on IDEAS

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    3. Pål Boug & Ådne Cappelen & Anders Rygh Swensen, 2006. "The New Keynesian Phillips Curve for a Small Open Economy," Discussion Papers 460, Statistics Norway, Research Department.
    4. Enrique Moral-Benito & Luis Serv鮠, 2015. "Testing weak exogeneity in cointegrated panels," Applied Economics, Taylor & Francis Journals, vol. 47(30), pages 3216-3228, June.
    5. Kul B. Luintel & Yongdeng Xu, 2017. "Testing weak exogeneity in multiplicative error models," Quantitative Finance, Taylor & Francis Journals, vol. 17(10), pages 1617-1630, October.
    6. Pål Boug & Ådne Cappelen & Anders R. Swensen, 2000. "Expectations in Export Price Formation Tests using Cointegrated VAR Models," Discussion Papers 283, Statistics Norway, Research Department.
    7. Manfred Neumann & Uli Fell & Richard Reichel*, 2005. "Successive Oligopolies, Vertical Downstream Integration and Foreclosure," Journal of Industry, Competition and Trade, Springer, vol. 5(1), pages 59-77, January.
    8. Zivot, Eric, 2000. "The Power Of Single Equation Tests For Cointegration When The Cointegrating Vector Is Prespecified," Econometric Theory, Cambridge University Press, vol. 16(3), pages 407-439, June.
    9. Neto, David, 2012. "Testing and estimating time-varying elasticities of Swiss gasoline demand," Energy Economics, Elsevier, vol. 34(6), pages 1755-1762.
    10. Pål Boug, 1999. "The Demand for Labour and the Lucas Critique. Evidence from Norwegian Manufacturing," Discussion Papers 256, Statistics Norway, Research Department.
    11. Pål Boug & Ådne Cappelen & Torbjørn Eika, 2013. "The importance of the distribution sector for exchange rate pass-through in a small open economy. A large scale macroeconometric modelling approach," Discussion Papers 731, Statistics Norway, Research Department.
    12. Pål Boug & Ådne Cappelen & Torbjørn Eika, 2005. "Exchange Rate Pass-through in a Small Open Economy," Discussion Papers 429, Statistics Norway, Research Department.

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