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Empirical Model Discovery and Theory EvaluationAutomatic Selection Methods in Econometrics$
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David F. Hendry and Jurgen A. Doornik

Print publication date: 2014

Print ISBN-13: 9780262028356

Published to MIT Press Scholarship Online: January 2015

DOI: 10.7551/mitpress/9780262028356.001.0001

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Testing Super Exogeneity

Testing Super Exogeneity

(p.263) 22 Testing Super Exogeneity
Empirical Model Discovery and Theory Evaluation

David F. Hendry

The MIT Press

An automatically computable test is described, with null rejection frequencies that are close to the nominal size, and potency for failures of super exogeneity. Impulse-indicator saturation is undertaken in the marginal models of the putative exogenous variables that enter the conditional model contemporaneously, and all significant outcomes are recorded. These indicators from the marginal models are added to the conditional model and tested for significance. Under the null of super exogeneity, the test has the correct gauge for a range of sizes of marginal-model saturation tests, both when those processes are constant, and when they undergo shifts in either mean or variance. Failures of super exogeneity from a violation of weak exogeneity are shown to be detectable when there are location shifts in the marginal models. The distribution and potency of the test are derived and simulated, with an application to testing super exogeneity for UK consumers’ expenditure.

Keywords:   Super exogeneity, Invariance, marginal models, impulse-indicator saturation

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