Testing for weak exogeneity in a SUR ECM

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Testing for weak exogeneity in a SUR ECM

Kathrinchen
This post was updated on .
Dear all,

I have set up a Labour Demand Error Correction Model for some German federal states.

As I expect the labour markets to be correlated I used a Seemingly Unrelated Regression using systemfit in R.

My Model  is:

d(ln(emp))_it = c + alpha*ln(emp)_i,t-1 + beta_1*ln(gdp)_i,t-1 + + beta_2*ln(wage)_i,t-1 + + beta_1*ln(i)_i,t-1 + gamma_1*d(ln(gdp))_it + gamma_2*d(ln(wage))_it

with emp_it being the employment in state i at time t, i stands for the real interest rate, ln() is the logarithmed data, while d() stands for the difference operator.

I would like to test now for weak exogeneity and I am not quite sure what kind of regression to run.  If I run:
d(ln(gdp))_it = c + alpha*ln(emp)_i,t-1 + beta_1*ln(gdp)_i,t-1 + + beta_2*ln(wage)_i,t-1 + + beta_1*ln(i)_i,t-1 + gamma_1*d(ln(emp))_it + gamma_2*d(ln(wage))_it

with Systemfit, alpha is statistically significant, so I have to reject the hypothesis of weak exogeneity...Literature is in my opinion not so clear on what to test!

I use data from an application, they conclude that endogeneity is not a problem: they regress the possible endogenous variables "on the presumed equilibrium relation, a constant and one autoregressive lag" - here I am not sure, what they mean.

I would very much appreciate your help!

Thanks a lot!
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Re: Testing for weak exogeneity in a SUR ECM

Arne Henningsen-3
Dear Kathrinchen

It seems to me that your question is about statistics rather than
about R and systemfit. If you find out how the statistical test should
be conducted theoretically, I can probably advise you how to implement
the test in R (systemfit).

Best wishes,
Arne


On 11 July 2013 13:21, Kathrinchen <[hidden email]> wrote:

> Dear all,
>
> I have set up a Labour Demand Error Correction Model for some German federal
> states.
>
> As I expect the labour markets to be correlated I used a Seemingly Unrelated
> Regression using systemfit in R.
>
> My Model  is:
>
> d(emp)_it = c + alpha*ln(emp)_i,t-1 + beta_1*ln(gdp)_i,t-1 + +
> beta_2*ln(wage)_i,t-1 + + beta_1*ln(i)_i,t-1 + gamma_1*d(gdp)_it +
> gamma_2*d(wage)_it
>
> with emp_it being the employment in state i at time t, i stands for the real
> interest rate, ln() is the logarithmed data, while d() stands for the
> difference operator.
>
> I would like to test now for weak exogeneity and I am not quite sure what
> kind of regression to run.  If I run:
> d(gdp)_it = c + alpha*ln(emp)_i,t-1 + beta_1*ln(gdp)_i,t-1 + +
> beta_2*ln(wage)_i,t-1 + + beta_1*ln(i)_i,t-1 + gamma_1*d(emp)_it +
> gamma_2*d(wage)_it
>
> with Systemfit, alpha is statistically significant, so I have to reject the
> hypothesis of weak exogeneity...Literature is in my opinion not so clear on
> what to test!
>
> I use data from an application, they conclude that endogeneity is not a
> problem: they regress the possible endogenous variables "on the presumed
> equilibrium relation, a constant and one autoregressive lag" - here I am not
> sure, what they mean.
>
> I would very much appreciate your help!
>
> Thanks a lot!
>
>
>
>
>
> --
> View this message in context: http://r.789695.n4.nabble.com/Testing-for-weak-exogeneity-in-a-SUR-ECM-tp4671321.html
> Sent from the R help mailing list archive at Nabble.com.
>
> ______________________________________________
> [hidden email] mailing list
> https://stat.ethz.ch/mailman/listinfo/r-help
> PLEASE do read the posting guide http://www.R-project.org/posting-guide.html
> and provide commented, minimal, self-contained, reproducible code.



--
Arne Henningsen
http://www.arne-henningsen.name

______________________________________________
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PLEASE do read the posting guide http://www.R-project.org/posting-guide.html
and provide commented, minimal, self-contained, reproducible code.