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Testing for Serial Correlation by Variable Addition in Dynamic Models Estimated by Instrumental Variables

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  • Godfrey, L G

Abstract

Instrumental variable tests for serial correlation can be carried out by adding lagged residuals from initial estimation to the regressors of the model under scrutiny and then checking their joint significance. It is shown that asymptotically valid tests are obtained if the lagged residuals are also added to the initial instrument set. Monte Carlo evidence suggests that useful improvements in finite sample behavior under null and alternative hypotheses can be produced when the instrument set is extended to include the relevant lagged residuals. Links with other tests are discussed and a modification allowing for conditional heteroskedasticity is described. Copyright 1994 by MIT Press.

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Bibliographic Info

Article provided by MIT Press in its journal Review of Economics & Statistics.

Volume (Year): 76 (1994)
Issue (Month): 3 (August)
Pages: 550-59

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Handle: RePEc:tpr:restat:v:76:y:1994:i:3:p:550-59

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Web page: http://mitpress.mit.edu/journals/

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Cited by:
  1. Chengsi Zhang & Denise R. Osborn & Dong Heon Kim, 2007. "The New Keynesian Phillips Curve: From Sticky Inflation to Sticky Prices," Discussion Paper Series 0715, Institute of Economic Research, Korea University.
  2. Chengsi Zhang & Denise R. Osborn & Dong Heon Kim, 2009. "Observed Inflation Forecasts and the New Keynesian Phillips Curve," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(3), pages 375-398, 06.
  3. Gordon H. Hanson & Raymond Robertson & Antonio Spilimbergo, 2002. "Does Border Enforcement Protect U.S. Workers From Illegal Immigration?," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 73-92, February.
  4. Gordon H. Hanson & Antonio Splimbergo, 1999. "Political Economy, Sectoral Shocks, and Border Enforcement," NBER Working Papers 7315, National Bureau of Economic Research, Inc.
  5. Alfred Guender & Yu Xie, 2007. "Is there an exchange rate channel in the forward-looking Phillips curve? A theoretical and empirical investigation," New Zealand Economic Papers, Taylor & Francis Journals, vol. 41(1), pages 5-28.
  6. Godfrey, L.G. & Tremayne, A.R., 2005. "The wild bootstrap and heteroskedasticity-robust tests for serial correlation in dynamic regression models," Computational Statistics & Data Analysis, Elsevier, vol. 49(2), pages 377-395, April.

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