Testing weak exogeneity in cointegrated panels

Enrique Moral-Benito and Luis Servén

No 1307, Working Papers from Banco de España

Abstract: 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

Keywords: panel data; cointegration; weak exogeneity; Monte Carlo methods (search for similar items in EconPapers)
JEL-codes: C23 C32 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2013-05
New Economics Papers: this item is included in nep-ecm and nep-ets
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Testing weak exogeneity in cointegrated panels (2015)
Working Paper: Testing weak exogeneity in cointegrated panels (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:1307

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