Switching Orthogonality

Kimio Morimune and Michael McAleer

International Economic Review, 1998, vol. 39, issue 1, 171-82

Abstract: A simultaneous equation system presumes that endogenous explanatory variables are correlated with equation-specific structural disturbances. The authors' paper proposes estimation methods and tests for switching orthogonality of a subset of the endogenous variables over a sample subset when the switching point is presumed known. Dividing the full sample period into two subperiods, the null hypothesis of switching orthogonality/endogeneity is that the subset of endogenous variables is correlated with the disturbance in one of the two periods only, whereas the alternative hypothesis of endogeneity is that the subset of variables is correlated with the disturbance in both periods. Copyright 1998 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Date: 1998
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