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Tests for Long-Run Granger Non-Causality in Cointegrated Systems

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  • Taku Yamamoto
  • Eiji Kurozumi

Abstract

In this article, we propose a new approach to test the hypothesis of long-run Granger non-causality in cointegrated systems. We circumvent the problem of singularity of the covariance matrix associated with the usual Wald-type test by proposing a generalized inverse procedure. A test for the ranks of submatrices of the cointegration matrix and its orthogonal matrix plays a vital role in our procedure. The relevant small-sample experiments indicate that the proposed method performs reasonably well in finite samples. As empirical applications, we examine long-run causal relations among long-term interest rates of three nations. Copyright 2006 The Authors Journal compilation 2006 Blackwell Publishing Ltd.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Time Series Analysis.

Volume (Year): 27 (2006)
Issue (Month): 5 (09)
Pages: 703-723

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Handle: RePEc:bla:jtsera:v:27:y:2006:i:5:p:703-723

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0143-9782

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Cited by:
  1. Paolo Paruolo, 2006. "The Likelihood Ratio Test for the Rank of a Cointegration Submatrix," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 68(s1), pages 921-948, December.
  2. Fanelli, Luca & Paruolo, Paolo, 2010. "Speed of adjustment in cointegrated systems," Journal of Econometrics, Elsevier, vol. 158(1), pages 130-141, September.
  3. Yiannis Kamarianakis & Vagelis Kaslis, 2005. "Geographical competition-complementarity relationships between Greek regional economies," ERSA conference papers ersa05p552, European Regional Science Association.
  4. Bates, Samuel & Vaugirard, Victor, 2009. "Monetary Transmission Channels around the Subprime Crisis : The US Experience," Economics Papers from University Paris Dauphine 123456789/1483, Paris Dauphine University.
  5. Al-Sadoon, Majid M., 2014. "Geometric and long run aspects of Granger causality," Journal of Econometrics, Elsevier, vol. 178(P3), pages 558-568.
  6. Bilge Kagan Ozdemir, 2009. "Banking Sector Stability During The Process Of Euro Adoption," Anadolu University Journal of Social Sciences, Anadolu University, vol. 9(1), pages 123-1236, June.

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