A simple test of exogeneity for recursively structured VAR models
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.
Document Type: Research Article
Affiliations: Department of Economics, Yonsei University, 134 Sinchon-dong Seodaemun-Gu, Seoul 120-749, South Korea
Publication date: 2005-11-10