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Testing for Contemporaneous Exogeneity in Linear Time-Series Models

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Abstract

We propose a test for contemporaneous exogeneity of regressors in linear time-series models. The test takes the form of a specification test with an expanding number of moment conditions. The test does not require external instruments and is based only on information contained in the regressors. Under the null of exogeneity, the test is characterized by a standard normal limit when the moment conditions are expanding at a particular rate relative to the sample size. We establish the consistency of the test under the alternative hypothesis when testing for exogeneity of the full set as well as a subset of regressors. We apply the proposed exogeneity test to measures of labor tightness or economic slack in two versions of the Phillips curve.

Suggested Citation

  • Prosper Dovonon & Nikolay Gospodinov, 2026. "Testing for Contemporaneous Exogeneity in Linear Time-Series Models," FRB Atlanta Working Paper 2026-14, Federal Reserve Bank of Atlanta.
    • Handle: RePEc:fip:fedawp:103986
    DOI: 10.29338/wp2026-14
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    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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