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Testing weak exogeneity in cointegrated panels


  • Enrique Moral-Benito

    () (Banco de España)

  • Luis Serven

    (The World Bank)


For reasons of empirical tractability, analysis of cointegrated economic time series is often developed in a partial setting, in which a subset of variables is explictly modeled conditional on the rest. This approach yields valid inference only if the conditioning variables are weakly exogenous for the parameters of interest. This paper proposes a new test of weak exogeneity in panel cointegration models. The test has a limiting Gumbel distribution that is obtained by first letting T ? ? and then letting N ? ?. We evaluate the accuracy of the asymptotic approximation in finite samples via simulation experiments. Finally, as an empirical illustration, we test weak exogeneity of disposable income and wealth in aggregate consumption

Suggested Citation

  • Enrique Moral-Benito & Luis Serven, 2013. "Testing weak exogeneity in cointegrated panels," Working Papers 1307, Banco de España;Working Papers Homepage.
  • Handle: RePEc:bde:wpaper:1307

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    References listed on IDEAS

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    Cited by:

    1. David Mayer-Foulkes & Kurt A. Hafner, 2017. "The technology Gradient in the Market Economy," Working papers DTE 606, CIDE, División de Economía.

    More about this item


    panel data; cointegration; weak exogeneity; Monte Carlo methods;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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