A simple test of exogeneity for recursively structured VAR models

Research output: Contribution to journalArticle

4 Citations (Scopus)

Abstract

The restriction of exogeneity of certain variables in structural VAR models is rarely tested for consistency with the actual data. The reason is obvious: such a test requires estimates of the structural parameters. This paper proposes a solution for models that assume long-run or contemporaneous recursive structures in identification. We show that in such cases, the exogeneity restriction can be assessed statistically using the well-known Granger non-causality test which is conveniently performed in the reduced-form VAR model. Two empirical examples are offered to demonstrate the usefulness of this result.

Original languageEnglish
Pages (from-to)2307-2313
Number of pages7
JournalApplied Economics
Volume37
Issue number20
DOIs
Publication statusPublished - 2005 Nov 10

Fingerprint

VAR model
Exogeneity
Reduced form
Granger non-causality
Structural VAR models
Structural parameters
Usefulness

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

Cite this

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A simple test of exogeneity for recursively structured VAR models. / Huh, Hyeon Seung.

In: Applied Economics, Vol. 37, No. 20, 10.11.2005, p. 2307-2313.

Research output: Contribution to journalArticle

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AB - The restriction of exogeneity of certain variables in structural VAR models is rarely tested for consistency with the actual data. The reason is obvious: such a test requires estimates of the structural parameters. This paper proposes a solution for models that assume long-run or contemporaneous recursive structures in identification. We show that in such cases, the exogeneity restriction can be assessed statistically using the well-known Granger non-causality test which is conveniently performed in the reduced-form VAR model. Two empirical examples are offered to demonstrate the usefulness of this result.

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