Tests for Long-Run Granger Non-Causality in Cointegrated Systems
In this article, we propose a new approach to test the hypothesis of long-run Granger non-causality in cointegrated systems. We circumvent the problem of singularity of the covariance matrix associated with the usual Wald-type test by proposing a generalized inverse procedure. A test for the ranks of submatrices of the cointegration matrix and its orthogonal matrix plays a vital role in our procedure. The relevant small-sample experiments indicate that the proposed method performs reasonably well in finite samples. As empirical applications, we examine long-run causal relations among long-term interest rates of three nations. Copyright 2006 The Authors Journal compilation 2006 Blackwell Publishing Ltd.
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Volume (Year): 27 (2006)
Issue (Month): 5 (09)
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