The Andersen-Jordan equation revisited

This paper deals with two common econometric criticisms of the Andersen and Jordan (1968)equation—the endogeneity of the right-hand-side variables and the ad hoc implementation of Almon's polynomial distributed lag estimation technique. Using the original Andersen-Jordan data, we found no support for either criticism. While we note that the PDL specification of their equation is highly unusual, we found that their policy conclusions do not depend their particular choice of lag length or polynomial degree or their imposition of the endpoint constraints. Furthermore, the right-hand-side variables were found to satisfy necessary conditions for statistical exogeneity.