A Comparison of Causality Tests Applied to the Bilateral Relationship between Consumption and GDP in the USA and Mexico
AbstractThis article compares several methodologies for analysing unidirectional and bi-directional causality between Consumption and GDP in the USA, Mexico and other countries during the period 1960-2000. Bilateral causality is analysed comparing Granger´s test, a modified version of Granger´s test here suggested, TSLS, Hausman´s causality test and other approaches. The main conclusion is that the modified version of Granger´s test performs rather well and that Hausman´s test is very often useful for reinforcing the conclusions of multiple equations models with contemporaneous interdependence. Regarding the bilateral relationship between Consumption and GDP we conclude that there is a moderate degree of contemporaneous relation, with a high degree of dependence of Private Consumption on GDP and a lower dependence in the case of the reverse relation, because GDP is more dependent on supply side conditions than on demand side. This result is relevant for economic policies in less developed countries where very often emphasis is made more in the reverse relations than in the main ones.
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Bibliographic InfoArticle provided by Euro-American Association of Economic Development in its journal International Journal of Applied Econometrics and Quantitative Studies .
Volume (Year): 1 (2004)
Issue (Month): 1 ()
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Web page: http://www.usc.es/economet/eaa.htm
Find related papers by JEL classification:
- C5 - Mathematical and Quantitative Methods - - Econometric Modeling
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
- E2 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment
- O51 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada
- O54 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
- O57 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
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