(Consistently) testing strict exogeneity against the alternative of predeterminedness in linear time-series models

Bias-corrected method of moments estimators for dynamic panel data models

“…While our bias-correction approach assumes that the regressor x it is strictly exogenous, we also analyse its robustness when the regressor is instead predetermined. In the empirical practice, the hypothesis of strictly exogenous regressors can be tested by adopting the tests considered in Su et al (2016) and Mayer (2020). To generate a predetermined regressor, we replace ǫ it in the data-generating process by ρu i,t−1 + 1 − ρ 2 ǫ it , and we set ρ = 0.4/σ ǫ .…”