Which of the following statements is true?
A)A model with a lagged dependent variable cannot satisfy the strict exogeneity assumption.
B)Stationarity is critical for OLS to have its standard asymptotic properties.
C)Efficient static models can be estimated for nonstationary time series.
D)In an autoregressive model, the dependent variable in the current time period varies with the error term of previous time periods.

Question

Quizplus · Accepted Answer

A model with a lagged dependent variable violates the strict exogeneity assumption because the lagged dependent variable is correlated with past error terms, which are part of the information set at the time the lagged dependent variable is determined.

Which of the Following Statements Is True