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Testing for Granger non-causality in heterogeneous panels

Author

Listed:
  • Dumitrescu, Elena-Ivona
  • Hurlin, Christophe

Abstract

This paper proposes a very simple test of Granger (1969) non-causality for heterogeneous panel data models. Our test statistic is based on the individual Wald statistics of Granger non causality averaged across the cross-section units. First, this statistic is shown to converge sequentially to a standard normal distribution. Second, the semi-asymptotic distribution of the average statistic is characterized for a fixed T sample. A standardized statistic based on an approximation of the moments of Wald statistics is hence proposed. Third, Monte Carlo experiments show that our standardized panel statistics have very good small sample properties, even in the presence of cross-sectional dependence.

Suggested Citation

  • Dumitrescu, Elena-Ivona & Hurlin, Christophe, 2012. "Testing for Granger non-causality in heterogeneous panels," Economic Modelling, Elsevier, vol. 29(4), pages 1450-1460.
    • Handle: RePEc:eee:ecmode:v:29:y:2012:i:4:p:1450-1460
    DOI: 10.1016/j.econmod.2012.02.014
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    References listed on IDEAS

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    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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