Effects of simultaneity on testing Granger-causality – a cautionary note about statistical problems and economic misinterpretations
Interpreting Granger causality as economic causality implies that the underlying VAR model is a structural economic model. However, this is wrong if simultaneity occurs. Magnitude and stability of possible errors are analysed in a simulation study. It is shown that economic misinterpretations of tests of Granger causality can occur with probability one for realistic parameter values. Furthermore, the power of the test can be rather low even with a sample size of T=50.
|Date of creation:||12 Oct 2012|
|Contact details of provider:|| Postal: Rolandstrasse 8, 49069 Osnabrueck|
Web page: http://www.iew.uni-osnabrueck.de/
More information through EDIRC
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.:
- Fiordelisi, Franco & Marques-Ibanez, David & Molyneux, Phil, 2011.
"Efficiency and risk in European banking,"
Journal of Banking & Finance,
Elsevier, vol. 35(5), pages 1315-1326, May.
- Fiordelisi, Franco & Marqués-Ibáñez, David & Molyneux, Phil, 2010. "Efficiency and risk in european banking," Working Paper Series 1211, European Central Bank.
- Casu, Barbara & Girardone, Claudia, 2009. "Testing the relationship between competition and efficiency in banking: A panel data analysis," Economics Letters, Elsevier, vol. 105(1), pages 134-137, October.
- Hartwig, Jochen, 2010. "Is health capital formation good for long-term economic growth? - Panel Granger-causality evidence for OECD countries," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 314-325, March.
- Bénédicte Vidaillet & V. D'Estaintot & P. Abécassis, 2005. "Introduction," Post-Print hal-00287137, HAL.
- Jai Sheen Mah, 2010. "Foreign Direct Investment Inflows and Economic Growth: The Case of Korea," Review of Development Economics, Wiley Blackwell, vol. 14(4), pages 726-735, November.
- Jagdish Handa & Shubha Rahman Khan, 2008. "Financial development and economic growth: a symbiotic relationship," Applied Financial Economics, Taylor & Francis Journals, vol. 18(13), pages 1033-1049.
- Pontus Braunerhjelm & Zoltán J. Ács & David B. Audretsch & Bo Carlsson, 2015. "The missing link: knowledge diffusion and entrepreneurship in endogenous growth," Chapters,in: Global Entrepreneurship, Institutions and Incentives, chapter 6, pages 108-128 Edward Elgar Publishing.
- Pontus Braunerhjelm & Zoltan Acs & David Audretsch & Bo Carlsson, 2010. "The missing link: knowledge diffusion and entrepreneurship in endogenous growth," Small Business Economics, Springer, vol. 34(2), pages 105-125, February.
- 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. Full references (including those not matched with items on IDEAS)