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Looking behind Granger causality

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  • Chen, Pu
  • Hsiao, Chih-Ying
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Abstract

Granger causality as a popular concept in time series analysis is widely applied in empirical research. The interpretation of Granger causality tests in a cause-effect context is, however, often unclear or even controversial, so that the causality label has faded away. Textbooks carefully warn that Granger causality does not imply true causality and preferably refer the Granger causality test to a forecasting technique. Applying theory of inferred causation, we develop in this paper a method to uncover causal structures behind Granger causality. In this way we re-substantialize the causal attribution in Granger causality through providing an causal explanation to the conditional dependence manifested in Granger causality.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 24859.

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Date of creation: Sep 2010
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Handle: RePEc:pra:mprapa:24859

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Keywords: Granger Causality; Time Series Causal Model; Graphical Model;

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References

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  1. Chen Pu & Flaschel Peter, 2006. "Measuring the Interaction of Wage and Price Phillips Curves for the U.S. Economy," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 10(4), pages 1-35, December.
  2. Granger, C. W. J., 1980. "Testing for causality : A personal viewpoint," Journal of Economic Dynamics and Control, Elsevier, vol. 2(1), pages 329-352, May.
  3. Hoover, Kevin D., 2005. "Automatic Inference Of The Contemporaneous Causal Order Of A System Of Equations," Econometric Theory, Cambridge University Press, vol. 21(01), pages 69-77, February.
  4. Krolzig, Hans-Martin & Peter Flaschel, 2003. "Wage and Price Phillips Curves," Royal Economic Society Annual Conference 2003 128, Royal Economic Society.
  5. Eichler, Michael, 2007. "Granger causality and path diagrams for multivariate time series," Journal of Econometrics, Elsevier, vol. 137(2), pages 334-353, April.
  6. Chihying, Hsiao & Chen, Pu, 2007. "Learning Causal Relations in Multivariate Time Series Data," Economics Discussion Papers 2007-15, Kiel Institute for the World Economy.
  7. Chen, Pu, 2010. "A time series causal model," MPRA Paper 24841, University Library of Munich, Germany.
  8. James M. Robins, 2003. "Uniform consistency in causal inference," Biometrika, Biometrika Trust, vol. 90(3), pages 491-515, September.
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