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Testing the Granger noncausality hypothesis in stationary nonlinear models of unknown functional form

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Author Info
Péguin-Feissolle, Anne () (GREQAM)
Strikholm, Birgit () (Dept. of Economic Statistics, Stockholm School of Economics)
Teräsvirta, Timo () (CREATES, School of Economics and Management)

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Abstract

In this paper we propose a general method for testing the Granger noncausality hypothesis in stationary nonlinear models of unknown functional form. These tests are based on a Taylor expansion of the nonlinear model around a given point in a sample space. We study the performance of our tests by a Monte Carlo experiment and compare these to the most widely used linear test. Our tests appear to be well-sized and have reasonably good power properties.

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Publisher Info
Paper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 672.

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Length: 30 pages
Date of creation: 27 Aug 2007
Date of revision:
Handle: RePEc:hhs:hastef:0672

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Related research
Keywords: Hypothesis testing; causality;

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Find related papers by JEL classification:
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions
C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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  1. Davidson, Russell & MacKinnon, James G, 1998. "Graphical Methods for Investigating the Size and Power of Hypothesis Tests," The Manchester School of Economic & Social Studies, Blackwell Publishing, vol. 66(1), pages 1-26, January.
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  2. Bell, David & Kay, Jim & Malley, Jim, 1996. "A non-parametric approach to non-linear causality testing," Economics Letters, Elsevier, vol. 51(1), pages 7-18, April. [Downloadable!] (restricted)
  3. G. Rech & T. Teräsvirta & R. Tschernig, . "A Simple variable selection technique for nonlinear models," Sonderforschungsbereich 373 1999-26, Humboldt Universitaet Berlin.
    Other versions:
  4. Ashley, R & Granger, C W J & Schmalensee, R, 1980. "Advertising and Aggregate Consumption: An Analysis of Causality," Econometrica, Econometric Society, vol. 48(5), pages 1149-67, July. [Downloadable!] (restricted)
  5. W. A. Broock & J. A. Scheinkman & W. D. Dechert & B. LeBaron, 1996. "A test for independence based on the correlation dimension," Econometric Reviews, Taylor and Francis Journals, vol. 15(3), pages 197-235. [Downloadable!] (restricted)
  6. Dr. Peter Kenning & Hilke Plassmann, 2004. "NeuroEconomics," Experimental 0412005, EconWPA. [Downloadable!]
  7. Li, Jing, 2006. "Testing Granger Causality in the presence of threshold effects," International Journal of Forecasting, Elsevier, vol. 22(4), pages 771-780. [Downloadable!] (restricted)
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This page was last updated on 2009-11-28.

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