Testing for Contemporaneous Exogeneity in Linear Time-Series Models

Prosper Dovonon and Nikolay Gospodinov

No 2026-14, FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta

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.

Keywords: contemporaneous exogeneity; conditional restrictions; expanding number of moment conditions; specification test; linear time series models; Phillips curve (search for similar items in EconPapers)
JEL-codes: C12 C22 C26 E24 E31 (search for similar items in EconPapers)
Pages: 48
Date: 2026-09-23
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedawp:103986

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DOI: 10.29338/wp2026-14

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