TESTING WEAK EXOGENEITY AND THE ORDER OF COINTEGRATION IN UK MONEY DEMAND DATA

This paper discusses autoregressive models allowing for processes integrated of order 2 and the various types of cointegration that can occur. A statistical analysis of such models that allows for the determination of the order of integration and the cointegrating ranks is outlined. The notion of weak exogeneity is discussed for I(1) processes. The results are illustrated by the UK money data of Hendry and Ericsson (1991).