Exogeneity in Vector Error Correction Models with Purely Exogenous Long‐Run Paths

Jacqueline Pradel and Christophe Rault

Oxford Bulletin of Economics and Statistics, 2003, vol. 65, issue 5, 629-653

Abstract: Existing exogeneity conditions of literature are only sufficient and imply ‘overly strong’ constraints on long‐run parameters. This paper presents some new results on exogeneity in vector error correction models. A key concept of the analysis is the ‘purely exogenous long‐run path’, i.e. a cointegrating vector only including ‘exogenous’ variables. Extending earlier results of Johansen, S. (1992). ‘Cointegration in partial systems and the efficiency of single‐equation analysis’, Journal of Econometrics, Vol. 52, pp. 389–402 and of Toda and Phillips (1991). Vector Autoregressions and Causality, Cowles Foundation Discussion Paper, No. 977 among others, we propose a framework based on two canonical representations of the long‐run matrix, which can constitute a suitable basis to formulate a necessary and sufficient condition for non‐causality as well as a condition for strong exogeneity. An interesting property is that the statistics involved in the sequential procedures for testing these conditions are distributed as χ2 variables and can, therefore, easily be calculated with the usual statistical computer packages, which makes our approach fully operational, empirically. Finally, the power and size distortions of the sequential test procedures are analysed using Monte Carlo experiments.

Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
https://doi.org/10.1111/j.1468-0084.2003.00065.x

Related works:
Working Paper: Exogeneity in vector error correction models with purely exogenous long-run paths (2003)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:obuest:v:65:y:2003:i:5:p:629-653

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0305-9049

Access Statistics for this article

Oxford Bulletin of Economics and Statistics is currently edited by Christopher Adam, Anindya Banerjee, Christopher Bowdler, David Hendry, Adriaan Kalwij, John Knight and Jonathan Temple

More articles in Oxford Bulletin of Economics and Statistics from Department of Economics, University of Oxford Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().