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Exogeneity, causality, and co-breaking in economic policy analysis of a small econometric model of money in the UK

Exogeneity, causality, and co-breaking in economic policy analysis of a small econometric model of money in the UK
Exogeneity, causality, and co-breaking in economic policy analysis of a small econometric model of money in the UK
Since the objective of economic policy is to change target variables in the DGP, when economic policy analysis uses an econometric model, it is important that the model delivers reliable inferences about policy responses in the DGP. This requires that the model be congruent and encompassing, and hence exogeneity, causality, cointegration, co-breaking, and invariance all play major roles. We discuss these roles in linear cointegrated VARs, prior to illustrating their importance in a bivariate model of money and interest rates in the UK over the last century.
exogeneity, causality, invariance, cointegration, co-breaking, impulse responses, money demand
0377-7332
267-294
Hendry, David F.
9c76f1f4-5773-4a45-9778-6ea40af72958
Mizon, Grayham E.
2b8353b4-0af4-48db-b552-6867dc1f4583
Hendry, David F.
9c76f1f4-5773-4a45-9778-6ea40af72958
Mizon, Grayham E.
2b8353b4-0af4-48db-b552-6867dc1f4583

Hendry, David F. and Mizon, Grayham E. (1998) Exogeneity, causality, and co-breaking in economic policy analysis of a small econometric model of money in the UK. Empirical Economics, 23 (3), 267-294. (doi:10.1007/BF01294408).

Record type: Article

Abstract

Since the objective of economic policy is to change target variables in the DGP, when economic policy analysis uses an econometric model, it is important that the model delivers reliable inferences about policy responses in the DGP. This requires that the model be congruent and encompassing, and hence exogeneity, causality, cointegration, co-breaking, and invariance all play major roles. We discuss these roles in linear cointegrated VARs, prior to illustrating their importance in a bivariate model of money and interest rates in the UK over the last century.

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Published date: 1998
Keywords: exogeneity, causality, invariance, cointegration, co-breaking, impulse responses, money demand

Identifiers

Local EPrints ID: 32882
URI: http://eprints.soton.ac.uk/id/eprint/32882
ISSN: 0377-7332
PURE UUID: f68f4924-5742-4cac-9bfb-51a51acd2d96

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Date deposited: 25 Jul 2006
Last modified: 15 Mar 2024 07:40

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Author: David F. Hendry
Author: Grayham E. Mizon

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