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! -- View this message in context: http://r.789695.n4.nabble.com/Testing-for-weak-exogeneity-in-a-SUR-ECM-tp4671321.html Sent from the R help mailing list archive at Nabble.com. ______________________________________________ [email protected] mailing list https://stat.ethz.ch/mailman/listinfo/r-help PLEASE do read the posting guide http://www.R-project.org/posting-guide.html and provide commented, minimal, self-contained, reproducible code.
