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An 'Expanded Equation' Approach to Weak-Exogeneity Tests in Structural Systems and a Monetary Application

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  • Revankar, Nagesh S
  • Yoshino, Naoyuki

Abstract

Let y (subscript "a"), y (subscript "b") denote the endogenous variables in a conventional structural system. The paper presents a simple test of H (subscript "o") : y (subscript "a") is weakly exogenous with respect to y (subscript "b")'s structural equation system (SES [subscript "b"]). The test is a test of whether y (subscript "a")'s reduced form residuals have zero coefficients in an "expanded equation" system (EES [subscript "b"]), which is the conditional version of the SES (subscript "b"), conditional on y (subscript "a"). It is implemented empirically to test whether the Fed was successful in controlling the federal funds rate over the regime in question. The paper also presents a generalization of Hausman's "difference test," a comparative view of most available tests, and some exact relations among the structural estimators. Copyright 1990 by MIT Press.

Suggested Citation

  • Revankar, Nagesh S & Yoshino, Naoyuki, 1990. "An 'Expanded Equation' Approach to Weak-Exogeneity Tests in Structural Systems and a Monetary Application," The Review of Economics and Statistics, MIT Press, vol. 72(1), pages 173-177, February.
    • Handle: RePEc:tpr:restat:v:72:y:1990:i:1:p:173-77
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    Cited by:

    1. Eliana González & Miguel I. Gómez & Luis F. Melo & José Luis Torres, 2006. "Forecasting Food Price Inflation in Developing Countries with Inflation Targeting Regimes: the Colombian Case," Borradores de Economia 2735, Banco de la Republica.
    2. James R. Rhodes & Naoyuki Yoshino, 1999. "Window Guidance By The Bank Of Japan: Was Lending Controlled?," Contemporary Economic Policy, Western Economic Association International, vol. 17(2), pages 166-176, April.
    3. Naoyuki Yoshino & Victoriia Alekhina, 2016. "Impact of oil price fluctuations on an energy-exporting economy: Evidence from Russia," Journal of Administrative and Business Studies, Professor Dr. Usman Raja, vol. 2(4), pages 156-166.
    4. James R. Rhodes & Naoyuki Yoshino, 2007. "Japan’s Monetary Policy Transition, 1955-2005," GRIPS Discussion Papers 07-04, National Graduate Institute for Policy Studies.
    5. Nakamura, Alice & Nakamura, Masao, 1998. "Model specification and endogeneity," Journal of Econometrics, Elsevier, vol. 83(1-2), pages 213-237.
    6. Naoyuki Yoshino & James R. Rhodes, 2004. "Japan's Monetary Policy Transition, 1955-2004," Econometric Society 2004 Far Eastern Meetings 725, Econometric Society.
    7. Farhad Farhad Taghizadeh-Hesary, 2015. "Macroeconomic effects of oil price fluctuations on emerging and developed economies in a model incorporating monetary variables," ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT, FrancoAngeli Editore, vol. 2015(2), pages 51-75.
    8. repec:adr:anecst:y:2002:i:67-68:p:16 is not listed on IDEAS
    9. Victoriia Alekhina & Naoyuki Yoshino, 2019. "Exogeneity of world oil prices to the Russian Federation’s economy and monetary policy," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 9(4), pages 531-555, December.
    10. Gomez, Miguel I. & Gonzalez, Eliana & Melo, Luis F. & Torres, Jose L., 2006. "Forecasting Food Price Inflation, Challenges for Central Banks in Developing Countries using an Inflation Targeting Framework: the Case of Colombia," 2006 Annual meeting, July 23-26, Long Beach, CA 21181, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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