Vinod, Hrishikesh D. New exogeneity tests and causal paths. (English) Zbl 1439.62248 Vinod, Hrishikesh D. (ed.) et al., Conceptual econometrics using R. Amsterdam: Elsevier/North Holland. Handb. Stat. 41, 33-64 (2019). Summary: We modify Suppes’ probabilistic causality theory by replacing inequalities among probabilities of events by unequal residuals of flipped kernel regression conditional expectation functions, \(E f(X_j|X_i,X_k)\) and \(E f(X_i|X_j, X_k)\), allowing asymmetry. Using three criteria we aggregate evidence from four orders of stochastic dominance and new asymmetric partial correlation coefficients to develop a unanimity index: \(UI\). The index yields a decision rule for \(X_i\) to be self-driven or exogenous, based on confirming the causal paths. Thus \(UI\) can replace Hausman-Wu’s indirect exogeneity test which diagnoses endogeneity (a disease) by showing that instrumental variables (IV) estimator remedy “works”. A simulation supports our decision rules. An illustration identifies exogenous variables which can help predict US economic recession.For the entire collection see [Zbl 1430.62013]. MSC: 62P20 Applications of statistics to economics 62F40 Bootstrap, jackknife and other resampling methods 05C90 Applications of graph theory 60E15 Inequalities; stochastic orderings Keywords:kernel regression; stochastic dominance; bootstrap inference; instrumental variables; directed acyclic graphs PDFBibTeX XMLCite \textit{H. D. Vinod}, Handb. Stat. 41, 33--64 (2019; Zbl 1439.62248) Full Text: DOI