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Testing for Granger causality between industrial output and CPI in the presence of regime shift: Swedish data

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  • A. Khalik Salman
  • Ghazi Shukur
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    Abstract

    In this paper, we focus on the Granger causality test in the presence of regime shift. We apply a vector autoregressive (4) model on Swedish series of industrial output and consumer price index for the period 1980:1-1998:6. To test for causality, three different test methods namely the single equation Likelihood Ratio test, the systemwise Rao's F- test and the Bootstrap test, have been used in this study. We show that when the assumption of parameter constancy is violated, due to the occurrence of the structural changes, Granger causality tests can provide misleading inference about the underlining relationship of causality.

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    Bibliographic Info

    Article provided by Emerald Group Publishing in its journal Journal of Economic Studies.

    Volume (Year): 31 (2004)
    Issue (Month): 6 (October)
    Pages: 492-499

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    Handle: RePEc:eme:jespps:v:31:y:2004:i:6:p:492-499

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    Related research

    Keywords: Economic change; Economic forecasting; Parametric measures;

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    Cited by:
    1. Islam, Faridul & Shahbaz, Muhammad & Shabbir, Muhammad, 2011. "Phillips curve in a small open economy: A time series exploration of North Cyprus," MPRA Paper 28397, University Library of Munich, Germany.
    2. Rafiq, Shuddhasawtta & Salim, Ruhul & Bloch, Harry, 2009. "Impact of crude oil price volatility on economic activities: An empirical investigation in the Thai economy," Resources Policy, Elsevier, vol. 34(3), pages 121-132, September.
    3. Ruhul A. Salim & Shuddhasattwa Rafiq & A. F. M. Kamrul Hassan, 2008. "Causality And Dynamics Of Energy Consumption And Output: Evidence From Non-Oecd Asian Countries," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 33(2), pages 1-26, December.
    4. Balcilar, Mehmet & Ozdemir, Zeynel Abidin & Arslanturk, Yalcin, 2010. "Economic growth and energy consumption causal nexus viewed through a bootstrap rolling window," Energy Economics, Elsevier, vol. 32(6), pages 1398-1410, November.
    5. Ahdi Noomen Ajmi & Ghassen El Montasser & Duc Khuong Nguyen, 2014. "Carbon emissions - income relationships with structural breaks: the case of the Middle East and North African countries," Working Papers 2014-296, Department of Research, Ipag Business School.

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