Testing Weak Exogeneity in Cointegrated System

Author Info

• Hsiao Chiying
• Chen Pu
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Abstract

This paper develops a limiting theory for Wald tests of weak exogeneity in error correction models (ECMs). It is well known that Wald statistics on cointegrated systems may involve nonstandard distribution and nuisance parameters, if $I(1)$ variables are not negligible in the statistics. To overcome this problem we construct a new statistic that takes only the $I(0)$ components of a Wald statistic into account and thus results in a valid $\chi^2$ criterion. Applying this procedure to test weak exogeneity in ECMs we obtain a simple and direct $\chi^2$ test

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File URL: http://repec.org/esFEAM04/up.27567.1079363411.pdf

Bibliographic Info

Paper provided by Econometric Society in its series Econometric Society 2004 Far Eastern Meetings with number 537.

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Handle: RePEc:ecm:feam04:537

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Related research

Keywords: Error correction model; Exogeneity; Wald testest; VAR; Cointegration;

Find related papers by JEL classification:

• C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
• C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General

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References

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1. Johansen, Soren, 1992. "Testing weak exogeneity and the order of cointegration in UK money demand data," Journal of Policy Modeling, Elsevier, vol. 14(3), pages 313-334, June.
2. Harbo, Ingrid, et al, 1998. "Asymptotic Inference on Cointegrating Rank in Partial Systems," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(4), pages 388-99, October.
3. Hiro Y. Toda & Peter C.B. Phillips, 1991. "Vector Autoregression and Causality," Cowles Foundation Discussion Papers 977, Cowles Foundation for Research in Economics, Yale University.
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Citations

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Cited by:
1. Zavkidjon Zavkiev, 2005. "Estimating A Model Of Inflation In Tajikistan," CAMA Working Papers 2005-27, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.

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