In the model y_t = ₀ + ₁x_t₁ + ₂x_t₂ + ….. + _kx_tk + u_t, the explanatory variables, x_t = (x_t₁, x_t₂ …., x_tk), are sequentially exogenous if: A)E(u_t|xt , xt-₁, ……) = E(u_t) = 0, t = 1,2, …. B)E(u_t|xt , xt-₁, ……) E(u_t) = 0, t = 1,2, …. C)E(u_t|xt , xt-₁, ……) = E(u_t) 0, t = 1,2, …. D)E(u_t|xt , xt-₁, ……) = E(u_t) = 1, t = 1,2, ….

Question

In the model y_t = ₀ + ₁x_t₁ + ₂x_t₂ + ….. + _kx_tk + u_t, the explanatory variables, x_t = (x_t₁, x_t₂ …., x_tk), are sequentially exogenous if: A)E(u_t|xt , xt-₁, ……) = E(u_t) = 0, t = 1,2, …. B)E(u_t|xt , xt-₁, ……) E(u_t) = 0, t = 1,2, …. C)E(u_t|xt , xt-₁, ……) = E(u_t) > 0, t = 1,2, …. D)E(u_t|xt , xt-₁, ……) = E(u_t) = 1, t = 1,2, ….

Quizplus · Accepted Answer

Sequential exogeneity requires that the error term u is not correlated with any of the explanatory variables or their lagged values. Therefore, the correct statement is that the error term is independent of the explanatory variables, which is captured by option A. Options B, C, and D are incorrect because they impose additional conditions that are not required for sequential exogeneity.

In the Model Yt = 0 + 1xt1

In the Model Y_t = ₀ + ₁x_t₁