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Exogeneity, Cointegration, and Economic Policy Analysis

Neil R. Ericsson, David F. Hendry and Grayham E. Mizon
Journal of Business & Economic Statistics
Vol. 16, No. 4 (Oct., 1998), pp. 370-387
DOI: 10.2307/1392607
Stable URL: http://www.jstor.org/stable/1392607
Page Count: 18
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Exogeneity, Cointegration, and Economic Policy Analysis
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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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