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Tests for Long-Run Granger Non-Causality in Cointegrated Systems

  • Yamamoto, Taku
  • Kurozumi, Eiji

In this paper, we propose a new approach to test the hypothesis of long-run Granger non-causality in cointegrated systems. We circumvent the problem of singularity of the variance-covariance matrix associated with the usual Wald type test by proposing a generalized inverse procedure, and an alternative simple procedure which can be approximated by a suitable chi-square distribution. A test for the ranks of submatrices of the cointegration matrix and its orthogonal matrix plays a vital role in the former. The relevant small sample experiments indicate that the proposed method performs reasonably well in finite samples. As empirical applications, we examine long-run causal relations among long-term interest rates of three and five nations.

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File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/16968/1/070econDP03-12.pdf
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Paper provided by Graduate School of Economics, Hitotsubashi University in its series Discussion Papers with number 2003-12.

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Length: 39 p.
Date of creation: Jun 2003
Date of revision:
Handle: RePEc:hit:econdp:2003-12
Note: February 2001; First Revision, February 2002; Second Revision, February 2003; Third Revision, June 2003
Contact details of provider: Phone: +81-42-580-8000
Web page: http://www.econ.hit-u.ac.jp/

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