Lagrance-multiplier tersts for weak exogeneity: a synthesis |
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Authors: | H Peter Boswijk Jean-Pierre Urbain |
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Institution: | 1. Department of Econometrics , University of Amsterdam, 1018 WB Amsterdam, Netherlands;2. Department of Quantitative Economics , University of Limburg , 6200 MD Maastricht, Netherlands |
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Abstract: | This paper unifies two seemingly separate approaches to test weak exogeneity in dynamic regression models with Lagrange-mulptiplier statistics. The first class of tests focuses on the orthogonality between innovations and conditioning variables, and thus is related to the Durbin-Wu-Hausman specification test. The second approach has been developed more recently in the context of context of cointegration and error correction models, ad concentrates on the question whether the conditioning variables display error correction behaviour. It is shown that the vital difference between the two approaches stems from the choice of the parmeters of interest. A new test is derived, which encompasses both its predecessors. The test is applied to an error correction model of the demand for money in Switzerland. |
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Keywords: | error correction models exogeneity lagrange-multiplier test money do-mand |
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