Working Paper
Exogeneity, cointegration, and economic policy analysis
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 paper then summarizes the other articles in this special section of the Journal of Business and Economic Statistics on \"Exogeneity, Cointegration, and Economic Policy Analysis.\"
Keywords: Econometrics; Economic policy;
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Bibliographic Information
Provider: Board of Governors of the Federal Reserve System (U.S.)
Part of Series: International Finance Discussion Papers
Publication Date: 1998
Number: 616