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A Note on the Hiemstra-Jones Test for Granger Non-causality

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  • Diks Cees

    ()
    (University of Amsterdam)

  • Panchenko Valentyn

    ()
    (University of Amsterdam)

Abstract

We address a consistency problem in the commonly used nonparametric test for Granger causality developed by Hiemstra and Jones (1994). We show that the relationship tested is not implied by the null hypothesis of Granger non-causality. Monte Carlo simulations using processes satisfying the null hypothesis show that, for a given nominal size, the actual rejection rate may tend to one as the sample size increases. Our results imply that evidence for nonlinear Granger causality reported in the applied empirical literature should be re-interpreted.

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Bibliographic Info

Article provided by De Gruyter in its journal Studies in Nonlinear Dynamics & Econometrics.

Volume (Year): 9 (2005)
Issue (Month): 2 (June)
Pages: 1-9

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Handle: RePEc:bpj:sndecm:v:9:y:2005:i:2:n:4

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  1. Brooks, C. & Henry, O.T., 1999. "Linear and Non-Linear Transmission of Equity Return Volatility: Evidence From the US, Japan, and Australia," Department of Economics - Working Papers Series 676, The University of Melbourne.
  2. Asimakopoulos, Ioannis & Ayling, David & Mansor Mahmood, Wan, 2000. "Non-linear Granger causality in the currency futures returns," Economics Letters, Elsevier, vol. 68(1), pages 25-30, July.
  3. Okunev, John & Wilson, Patrick & Zurbruegg, Ralf, 2002. "Relationships between Australian Real Estate and Stock Market Prices--A Case of Market Inefficiency," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 21(3), pages 181-92, April.
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