Testing for Granger causality in the presence of measurement errors
AbstractIn this paper a potential problem with tests for Granger-causality is investigated. If one of the two variables under study, but not the other, is measured with error the consequence is that tests of forecastablity of the variable without measurement error by the variable with measurement error will be rejected less often than it should. Since this is not the case for the test of forecastability of the variable with measurement error by the one without there is a danger of concluding that one variable leads the other while it is in fact a feed-back relationship. The problem is illustrated by an example.
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Bibliographic InfoPaper provided by Department of Business and Management Science, Norwegian School of Economics in its series Discussion Papers with number 2004/11.
Length: 7 pages
Date of creation: 24 Sep 2004
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Granger causality; measurement error;
Other versions of this item:
- Jonas Andersson, 2005. "Testing for Granger causality in the presence of measurement errors," Economics Bulletin, AccessEcon, vol. 3(47), pages 1-13.
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
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- Bovi, Maurizio, 2013. "Are the representative agent’s beliefs based on efficient econometric models?," Journal of Economic Dynamics and Control, Elsevier, vol. 37(3), pages 633-648.
- Daniel Ventosa-Santaulària & José Eduardo Vera-Valdés, 2008. "Granger-Causality in the presence of structural breaks," Economics Bulletin, AccessEcon, vol. 3(61), pages 1-14.
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