Exogeneity, Cointegration, and Economic Policy Analysis

Neil R. Ericsson · David Forbes Hendry · Grayham E. Mizon

48 citations0/0 files storedJournal of Business and Economic Statistics

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Monetary Policy and Economic Impact Economic theories and models Diverse Scientific and Economic Studies

Abstract

This overview examines conditions for reliable economic policy analysis based on econometric models, focusing on the econometric concepts of exogeneity, cointegration, causality, and invariance. Weak, strong, and super exogeneity are discussed in general, and these concepts are then applied to the use of econometric models in policy analysis when the variables are cointegrated. Implications follow for model constancy, the Lucas critique, equation inversion, and impulse response analysis. A small money-demand model for the United Kingdom illustrates the main analytical points. This article then summarizes the other articles in this issue's special section on exogeneity, cointegration, and economic policy analysis.

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2006Money, inflation and output in Romania, 1992–2000 2008Measuring regional effects of monetary policy in Canada 2012Nonstationarity and nonlinearity in inflation rate: Some further evidence 2002Separation, Weak Exogeneity and P-T Decompositions in Cointegrated VAR Systems with Common Features 2010Estimation of the equilibrium exchange rate: The CHEER approach 2000Econometric Modelling of the Aggregate Time‐Series Relationship Between Consumers' Expenditure and Income in the United Kingdom 2000On the Time‐Series Approach to Econometric Model Building 2000Testing Dynamic Specification in Small Simultaneous Systems: An Application to a Model of Building Society Behaviour in the United Kingdom

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