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Geometric and long run aspects of Granger causality

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This paper extends multivariate Granger causality to take into account the subspaces along which Granger causality occurs as well as long run Granger causality. The properties of these new notions of Granger causality, along with the requisite restrictions, are derived and extensively studied for a wide variety of time series processes including linear invertible process and VARMA. Using the proposed extensions, the paper demonstrates that: (i) mean reversion in L2 is an instance of long run Granger non-causality, (ii) cointegration is a special case of long run Granger non-causality along a subspace, (iii) controllability is a special case of Granger causality, and finally (iv) linear rational expectations entail (possibly testable) Granger causality restriction along subspaces.

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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1356.

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Date of creation: Jan 2013
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Handle: RePEc:upf:upfgen:1356

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Web page: http://www.econ.upf.edu/

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Keywords: Granger causality; long run Granger causality; L2 -mean-reversion; p-mixing; cointegration; VARMA; controllability; Kalman Decomposition; linear rational expectations;

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  1. Some Weekend Reading
    by Dave Giles in Econometrics Beat: Dave Giles' Blog on 2013-11-01 17:41:00
  2. Some Weekend Reading
    by ? in R-bloggers on 2013-11-01 17:41:00
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Cited by:
  1. Majid M. Al-Sadoon, 2014. "A general theory of rank testing," Economics Working Papers 1411, Department of Economics and Business, Universitat Pompeu Fabra.

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