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Step-by-Step Causality Revisited: Theory and Evidence

Author

Listed:
  • Konstantinos N. Konstantakis

    (National Technical University of Athens)

  • Panayotis G. Michaelides

    (National Technical University of Athens)

Abstract

The present paper introduces a VAR model with exogenous variables for testing one-sided (non-)causality by extending the works of Dufour and Renault (1998) and Dufour et al. (2006). In this context, it derives a test statistic for formally investigating one sided (non-)causality, while providing a simple algorithm for implementing the one sided (non-)causality test in a system framework and not equation-by-equation extending, thus, Dufour et al. (2006). We illustrate our approach by using a monthly dataset including dummy variables on Total Car Sales in the area of Athens over the period 2003-2012. According to our findings all variables cause the evolution of Total Sales cycles immediately and for almost eight (8) quarters when most of the causality effects die out completely. Clearly, future research on extending the methodology to a panel set-up would be of great interest.

Suggested Citation

  • Konstantinos N. Konstantakis & Panayotis G. Michaelides, 2015. "Step-by-Step Causality Revisited: Theory and Evidence," Economics Bulletin, AccessEcon, vol. 35(2), pages 871-877.
    • Handle: RePEc:ebl:ecbull:eb-15-00099
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    References listed on IDEAS

    as
    1. Dufour, Jean-Marie & Pelletier, Denis & Renault, Eric, 2006. "Short run and long run causality in time series: inference," Journal of Econometrics, Elsevier, vol. 132(2), pages 337-362, June.
    2. Jean-Marie Dufour & Eric Renault, 1998. "Short Run and Long Run Causality in Time Series: Theory," Econometrica, Econometric Society, vol. 66(5), pages 1099-1126, September.
    3. Jean-Marie Dufour & David Tessier, 2006. "Short-Run and Long-Run Causality between Monetary Policy Variables and Stock Prices," Staff Working Papers 06-39, Bank of Canada.
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    Cited by:

    1. Daglis, Theodoros & Konstantakis, Konstantinos N. & Michaelides, Panayotis G., 2019. "Solar events and economic activity: Evidence from the US Telecommunications industry (1996–2014)," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 534(C).

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    More about this item

    Keywords

    Causality testing; asymptotics; VAR; car sales; Greece.;
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General

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