# [R] Testing for weak exogeneity in a SUR ECM

Arne Henningsen arne.henningsen at gmail.com
Sat Jul 13 11:25:16 CEST 2013

Dear Kathrinchen

It seems to me that your question is about statistics rather than
about R and systemfit. If you find out how the statistical test should
be conducted theoretically, I can probably advise you how to implement
the test in R (systemfit).

Best wishes,
Arne

On 11 July 2013 13:21, Kathrinchen <katha.mibi at web.de> wrote:
> Dear all,
>
> I have set up a Labour Demand Error Correction Model for some German federal
> states.
>
> As I expect the labour markets to be correlated I used a Seemingly Unrelated
> Regression using systemfit in R.
>
> My Model  is:
>
> d(emp)_it = c + alpha*ln(emp)_i,t-1 + beta_1*ln(gdp)_i,t-1 + +
> beta_2*ln(wage)_i,t-1 + + beta_1*ln(i)_i,t-1 + gamma_1*d(gdp)_it +
> gamma_2*d(wage)_it
>
> with emp_it being the employment in state i at time t, i stands for the real
> interest rate, ln() is the logarithmed data, while d() stands for the
> difference operator.
>
> I would like to test now for weak exogeneity and I am not quite sure what
> kind of regression to run.  If I run:
> d(gdp)_it = c + alpha*ln(emp)_i,t-1 + beta_1*ln(gdp)_i,t-1 + +
> beta_2*ln(wage)_i,t-1 + + beta_1*ln(i)_i,t-1 + gamma_1*d(emp)_it +
> gamma_2*d(wage)_it
>
> with Systemfit, alpha is statistically significant, so I have to reject the
> hypothesis of weak exogeneity...Literature is in my opinion not so clear on
> what to test!
>
> I use data from an application, they conclude that endogeneity is not a
> problem: they regress the possible endogenous variables "on the presumed
> equilibrium relation, a constant and one autoregressive lag" - here I am not
> sure, what they mean.
>
> I would very much appreciate your help!
>
> Thanks a lot!
>
>
>
>
>
> --
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>
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