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Long-Run Causality, with an Application to International Links between Long-Term Interest Rates

  • Bruneau, Catherine
  • Jondeau, Eric

In this paper we give a precise definition of long-run causality in a multivariate non-stationary, possibly cointegrated, framework. A variable is said to be causal for another in the long-run if knowledge of the past of the former improves long-run predictions of the latter. In a VAR framework, we show that long-run non-causality can be easily tested with a Wald statistics, conditionally on the cointegration rank. The methodology is used to study long-run causal links between US, German, and French long-term interest rates from January 1990 to June 1997. Copyright 1999 by Blackwell Publishing Ltd

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Article provided by Department of Economics, University of Oxford in its journal Oxford Bulletin of Economics & Statistics.

Volume (Year): 61 (1999)
Issue (Month): 4 (November)
Pages: 545-68

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Handle: RePEc:bla:obuest:v:61:y:1999:i:4:p:545-68
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