Spurious Granger causality between a broken-trend stationary process and a stochastic trend process
This paper examines spurious Granger causality between a trend stationary process with structural breaks and a stochastic trend process. Monte Carlo simulations show that whether or not there are deterministic variables in the testing models, the sample size and the parameter values of the data generation process can affect the empirical frequencies of spurious Granger causality relations in different degrees. The analysis also points out that an alternative rank-based causality test method can avoid the risk of spurious causality to some extent by adopting an intercept and deterministic trend term in the testing regressions.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 81 (2011)
Issue (Month): 8 ()
|Contact details of provider:|| Web page: http://www.journals.elsevier.com/mathematics-and-computers-in-simulation/|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jushan Bai, 1995.
"Estimating Multiple Breaks One at a Time,"
95-18, Massachusetts Institute of Technology (MIT), Department of Economics.
- Perron, Pierre, 1989.
"The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis,"
Econometric Society, vol. 57(6), pages 1361-1401, November.
- Perron, P, 1988. "The Great Crash, The Oil Price Shock And The Unit Root Hypothesis," Papers 338, Princeton, Department of Economics - Econometric Research Program.
- He, Zonglu & Maekawa, Koichi, 2001. "On spurious Granger causality," Economics Letters, Elsevier, vol. 73(3), pages 307-313, December.
- Diks Cees & Panchenko Valentyn, 2005.
"A Note on the Hiemstra-Jones Test for Granger Non-causality,"
Studies in Nonlinear Dynamics & Econometrics,
De Gruyter, vol. 9(2), pages 1-9, June.
- Diks, C.G.H. & Panchenko, V., 2004. "A note on the Hiemstra-Jones test for Granger non-causality," CeNDEF Working Papers 04-10, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
- Hiemstra, Craig & Jones, Jonathan D, 1994. " Testing for Linear and Nonlinear Granger Causality in the Stock Price-Volume Relation," Journal of Finance, American Finance Association, vol. 49(5), pages 1639-64, December.
- Eric Zivot & Donald W.K. Andrews, 1990.
"Further Evidence on the Great Crash, the Oil Price Shock, and the Unit Root Hypothesis,"
Cowles Foundation Discussion Papers
944, Cowles Foundation for Research in Economics, Yale University.
- Zivot, Eric & Andrews, Donald W K, 1992. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(3), pages 251-70, July.
- Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
- Jushan Bai & Pierre Perron, 1998.
"Estimating and Testing Linear Models with Multiple Structural Changes,"
Econometric Society, vol. 66(1), pages 47-78, January.
- Perron, P. & Bai, J., 1995. "Estimating and Testing Linear Models with Multiple Structural Changes," Cahiers de recherche 9552, Universite de Montreal, Departement de sciences economiques.
- Perron, P. & Bai, J., 1995. "Estimating and Testing Linear Models with Multiple Structural Changes," Cahiers de recherche 9552, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- Cook, Steven, 2008. "Further analysis of spurious causality," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 79(3), pages 647-651.
- Perron, Pierre & Zhu, Xiaokang, 2005. "Structural breaks with deterministic and stochastic trends," Journal of Econometrics, Elsevier, vol. 129(1-2), pages 65-119.
- Bruce E. Hansen, 2001. "The New Econometrics of Structural Change: Dating Breaks in U.S. Labour Productivity," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 117-128, Fall.
When requesting a correction, please mention this item's handle: RePEc:eee:matcom:v:81:y:2011:i:8:p:1673-1681. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.