A Bayesian analysis of exogeneity in models pooling time-series and cross-sectional data

The analysis of exogeneity in econometric time-series models as formalized in the seminal paper by Engle et al. [Econometrica 51 (1983), 277-304] is extended to cover a more general class of models, including error-components models. The Bayesian framework adopted here allows us to take full advantage of a number of statistical tools, related to the reduction of Bayesian experiments, and motivates a careful consideration of prediction issues, leading to a concept of predictive exogeneity. We also adapt the formal definitions of weak and strong exogeneity introduced in Engle et al. (1983), and provide a naturally nested set of definitions for exogeneity. An example highlights the main implications of our analysis for econometric modelling.