IDEAS home Printed from https://ideas.repec.org/a/gam/jecnmx/v8y2020i3p31-d393890.html
   My bibliography  Save this article

The Discovery of Long-Run Causal Order: A Preliminary Investigation

Author

Listed:
  • Kevin D. Hoover

    (Department of Economics, Duke University, Durham, NC 27708, USA
    Department of Philosophy, Duke University, Durham, NC 27708, USA)

Abstract

The relation between causal structure and cointegration and long-run weak exogeneity is explored using some ideas drawn from the literature on graphical causal modeling. It is assumed that the fundamental source of trending behavior is transmitted from exogenous (and typically latent) trending variables to a set of causally ordered variables that would not themselves display nonstationary behavior if the nonstationary exogenous causes were absent. The possibility of inferring the long-run causal structure among a set of time-series variables from an exhaustive examination of weak exogeneity in irreducibly cointegrated subsets of variables is explored and illustrated.

Suggested Citation

  • Kevin D. Hoover, 2020. "The Discovery of Long-Run Causal Order: A Preliminary Investigation," Econometrics, MDPI, vol. 8(3), pages 1-25, August.
    • Handle: RePEc:gam:jecnmx:v:8:y:2020:i:3:p:31-:d:393890
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2225-1146/8/3/31/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2225-1146/8/3/31/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Halbert White & Xun Lu, 2010. "Granger Causality and Dynamic Structural Systems," Journal of Financial Econometrics, Oxford University Press, vol. 8(2), pages 193-243, spring.
    2. Hoover, Kevin D., 1990. "The Logic of Causal Inference: Econometrics and the Conditional Analysis of Causation," Economics and Philosophy, Cambridge University Press, vol. 6(2), pages 207-234, October.
    3. Søren Johansen & Morten Nyboe Tabor, 2017. "Cointegration between Trends and Their Estimators in State Space Models and Cointegrated Vector Autoregressive Models," Econometrics, MDPI, vol. 5(3), pages 1-15, August.
    4. M. Hashem Pesaran & Ron P. Smith, 1998. "Structural Analysis of Cointegrating VARs," Journal of Economic Surveys, Wiley Blackwell, vol. 12(5), pages 471-505, December.
    5. Pagan, A.R. & Pesaran, M. Hashem, 2008. "Econometric analysis of structural systems with permanent and transitory shocks," Journal of Economic Dynamics and Control, Elsevier, vol. 32(10), pages 3376-3395, October.
    6. Selva Demiralp & Kevin D. Hoover & Stephen J. Perez, 2008. "A Bootstrap Method for Identifying and Evaluating a Structural Vector Autoregression," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 70(4), pages 509-533, August.
    7. Cooley, Thomas F. & Leroy, Stephen F., 1985. "Atheoretical macroeconometrics: A critique," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 283-308, November.
    8. Davidson, James, 1998. "Structural relations, cointegration and identification: some simple results and their application," Journal of Econometrics, Elsevier, vol. 87(1), pages 87-113, August.
    9. M. Hashem Pesaran & Yongcheol Shin, 2002. "Long-Run Structural Modelling," Econometric Reviews, Taylor & Francis Journals, vol. 21(1), pages 49-87.
    10. Selva Demiralp & Kevin D. Hoover, 2003. "Searching for the Causal Structure of a Vector Autoregression," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(s1), pages 745-767, December.
    11. Søren Johansen & Morten Nyboe Tabor, 2017. "Cointegration between trends and their estimators in state space models and CVAR models," CREATES Research Papers 2017-11, Department of Economics and Business Economics, Aarhus University.
    12. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
    13. White, Halbert & Pettenuzzo, Davide, 2014. "Granger causality, exogeneity, cointegration, and economic policy analysis," Journal of Econometrics, Elsevier, vol. 178(P2), pages 316-330.
    14. Christopher A. Sims, 1982. "Policy Analysis with Econometric Models," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 13(1), pages 107-164.
    15. Juselius, Katarina, 2006. "The Cointegrated VAR Model: Methodology and Applications," OUP Catalogue, Oxford University Press, number 9780199285679.
    16. Hoover, Kevin & Juselius, Katarina, 2015. "Trygve Haavelmo’S Experimental Methodology And Scenario Analysis In A Cointegrated Vector Autoregression," Econometric Theory, Cambridge University Press, vol. 31(2), pages 249-274, April.
    17. Hoover,Kevin D., 2001. "Causality in Macroeconomics," Cambridge Books, Cambridge University Press, number 9780521002882.
    18. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
    19. Kevin D. Hoover & Soren Johansen & Katarina Juselius, 2008. "Allowing the Data to Speak Freely: The Macroeconometrics of the Cointegrated Vector Autoregression," American Economic Review, American Economic Association, vol. 98(2), pages 251-255, May.
    20. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
    21. Selva Demiralp & Kevin D. Hoover, 2003. "Searching for the Causal Structure of a Vector Autoregression," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(s1), pages 745-767, December.
    22. Hoover, Kevin D., 2014. "On the Reception of Haavelmo’s Econometric Thought," Journal of the History of Economic Thought, Cambridge University Press, vol. 36(1), pages 45-65, March.
    23. Søren Johansen, 2019. "Cointegration and Adjustment in the CVAR(∞) Representation of Some Partially Observed CVAR(1) Models," Econometrics, MDPI, vol. 7(1), pages 1-10, January.
    24. Sims, Christopher A, 1972. "Money, Income, and Causality," American Economic Review, American Economic Association, vol. 62(4), pages 540-552, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Fazal, Rizwan & Rehman, Syed Aziz Ur & Bhatti, M. Ishaq, 2022. "Graph theoretic approach to expose the energy-induced crisis in Pakistan," Energy Policy, Elsevier, vol. 169(C).
    2. Fazal, Rizwan & Bhatti, M. Ishaq & Rehman, Atiq Ur, 2022. "Causality Analysis: The study of Size and Power based on riz-PC Algorithm of Graph Theoretic Approach," Technological Forecasting and Social Change, Elsevier, vol. 180(C).
    3. Rizwan Fazal & Syed Aziz Ur Rehman & Muhammad Ishaq Bhatti & Atiq Ur Rehman & Fariha Arooj & Umar Hayat, 2021. "A Cross-Sectoral Investigation of the Energy–Environment–Economy Causal Nexus in Pakistan: Policy Suggestions for Improved Energy Management," Energies, MDPI, vol. 14(17), pages 1-22, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kevin Hoover, 2005. "Economic Theory and Causal Inference," Working Papers 64, University of California, Davis, Department of Economics.
    2. Kevin Hoover, 2005. "Economic Theory and Causal Inference," Working Papers 257, University of California, Davis, Department of Economics.
    3. Geweke, J. & Joel Horowitz & Pesaran, M.H., 2006. "Econometrics: A Bird’s Eye View," Cambridge Working Papers in Economics 0655, Faculty of Economics, University of Cambridge.
    4. John D. Levendis, 2018. "Time Series Econometrics," Springer Texts in Business and Economics, Springer, number 978-3-319-98282-3, July.
    5. Al-Sadoon, Majid M., 2019. "Testing subspace Granger causality," Econometrics and Statistics, Elsevier, vol. 9(C), pages 42-61.
    6. Pedro Garcia Duarte & Kevin D. Hoover, 2012. "Observing Shocks," History of Political Economy, Duke University Press, vol. 44(5), pages 226-249, Supplemen.
    7. Gossé, Jean-Baptiste & Guillaumin, Cyriac, 2013. "L’apport de la représentation VAR de Christopher A. Sims à la science économique," L'Actualité Economique, Société Canadienne de Science Economique, vol. 89(4), pages 309-319, Décembre.
    8. Kenneth F. Wallis & Jan P. A. M. Jacobs, 2005. "Comparing SVARs and SEMs: two models of the UK economy," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(2), pages 209-228.
    9. Ralf Brüggemann & Christian Kascha, 2017. "Directed Graphs and Variable Selection in Large Vector Autoregressive Models," Working Paper Series of the Department of Economics, University of Konstanz 2017-06, Department of Economics, University of Konstanz.
    10. Alessio Moneta, 2005. "Causality in macroeconometrics: some considerations about reductionism and realism," Journal of Economic Methodology, Taylor & Francis Journals, vol. 12(3), pages 433-453.
    11. Adrian C. Darnell, 1994. "A Dictionary Of Econometrics," Books, Edward Elgar Publishing, number 118.
    12. Jacobs, Jan P.A.M. & Wallis, Kenneth F., 2010. "Cointegration, long-run structural modelling and weak exogeneity: Two models of the UK economy," Journal of Econometrics, Elsevier, vol. 158(1), pages 108-116, September.
    13. Katarina Juselius, 2017. "A CVAR scenario for a standard monetary model using theory-consistent expectations," Discussion Papers 17-08, University of Copenhagen. Department of Economics.
    14. Daniel Felix Ahelegbey & Monica Billio & Roberto Casarin, 2016. "Bayesian Graphical Models for STructural Vector Autoregressive Processes," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 31(2), pages 357-386, March.
    15. Bruns, Stephan B. & Moneta, Alessio & Stern, David I., 2021. "Estimating the economy-wide rebound effect using empirically identified structural vector autoregressions," Energy Economics, Elsevier, vol. 97(C).
    16. Tsai, Grace Yueh-Hsiang, 1989. "A dynamic model of the U.S. cotton market with rational expectations," ISU General Staff Papers 1989010108000012168, Iowa State University, Department of Economics.
    17. Duo Qin, 2006. "VAR Modelling Approach and Cowles Commission Heritage," Working Papers 557, Queen Mary University of London, School of Economics and Finance.
    18. Al-Sadoon, Majid M., 2014. "Geometric and long run aspects of Granger causality," Journal of Econometrics, Elsevier, vol. 178(P3), pages 558-568.
    19. Piyachart Phiromswad, 2014. "Measuring monetary policy with empirically grounded identifying restrictions," Empirical Economics, Springer, vol. 46(2), pages 681-699, March.
    20. Jacobs, Jan P.A.M. & Wallis, Kenneth F., 2010. "Cointegration, long-run structural modelling and weak exogeneity: Two models of the UK economy," Journal of Econometrics, Elsevier, vol. 158(1), pages 108-116, September.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jecnmx:v:8:y:2020:i:3:p:31-:d:393890. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.