Vector Autoregression and Causality
This paper develops a complete limit theory for Wald tests of Granger causality in levels vector autoregression (VAR's) and Johansen-type error correction models (ECM's) allowing for the presence of stochastic trends and cointegration. Earlier work by Sims, Stock and Watson (1990) on trivariate VAR systems is extended to the general case, thereby formally characterizing the circumstances when these Wald tests are asymptotically valid as chi-square criteria. Our results for inference from unrestricted levels VAR are not encouraging.
|Date of creation:||May 1991|
|Publication status:||Published in Econometrica (November 1993), 61(6): 1367-1393|
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|Order Information:|| Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA|
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