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Short run and long run causality in time series: Inference

  • DUFOUR, Jean-Marie
  • PELLETIER, Denis
  • RENAULT, Éric

We propose methods for testing hypotheses of non-causality at various horizons, as defined in Dufour and Renault (1998, Econometrica). We study in detail the case of VAR models and we propose linear methods based on running vector autoregressions at different horizons. While the hypotheses considered are nonlinear, the proposed methods only require linear regression techniques as well as standard Gaussian asymptotic distributional theory. Bootstrap procedures are also considered. For the case of integrated processes, we propose extended regression methods that avoid nonstandard asymptotics. The methods are applied to a VAR model of the U.S. economy.

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File URL: http://hdl.handle.net/1866/505
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Paper provided by Universite de Montreal, Departement de sciences economiques in its series Cahiers de recherche with number 2003-16.

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Length: 28 pages
Date of creation: 2003
Date of revision:
Handle: RePEc:mtl:montde:2003-16
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  1. Dufour, Jean-Marie, 2006. "Monte Carlo tests with nuisance parameters: A general approach to finite-sample inference and nonstandard asymptotics," Journal of Econometrics, Elsevier, vol. 133(2), pages 443-477, August.
  2. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
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  6. Judith A. Giles, 2000. "Testing for Two-Step Granger Noncausality in Trivariate VAR Models," Econometrics Working Papers 0008, Department of Economics, University of Victoria.
  7. Dufour, J.M. & Ghysels, E. & Hall, A., 1992. "Generalized Predictive Tests and Structural Change Analysis in Econometrics," Cahiers de recherche 9223, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  8. Dufour, J.M. & Khalaf, L., 2000. "Simulation-Based Finite and Large Sample Tests in Multivariate Regressions," Cahiers de recherche 2000-10, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  9. Yamada, Hiroshi & Toda, Hiro Y., 1998. "Inference in possibly integrated vector autoregressive models: some finite sample evidence," Journal of Econometrics, Elsevier, vol. 86(1), pages 55-95, June.
  10. Paparoditis, Efstathios, 1996. "Bootstrapping Autoregressive and Moving Average Parameter Estimates of Infinite Order Vector Autoregressive Processes," Journal of Multivariate Analysis, Elsevier, vol. 57(2), pages 277-296, May.
  11. Hiro Y. Toda & Peter C.B. Phillips, 1991. "Vector Autoregression and Causality," Cowles Foundation Discussion Papers 977, Cowles Foundation for Research in Economics, Yale University.
  12. Jean-Marie Dufour & Denis Pelletier & Éric Renault, 2003. "Short Run and Long Run Causality in Time Series: Inference," CIRANO Working Papers 2003s-61, CIRANO.
  13. Yamamoto, Taku, 1996. "A Simple Approach to the Statistical Inference in Linear Time Series Models Which May Have Some Unit Roots," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 37(2), pages 87-100, December.
  14. H. Lütkepohl & P. Saikkonen, 1995. "Impulse Response Analysis in Infinite Order Cointegrated Vector Autoregressive Processes," SFB 373 Discussion Papers 1995,11, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  15. Choi, In, 1993. "Asymptotic Normality of the Least-Squares Estimates for Higher Order Autoregressive Integrated Processes with Some Applications," Econometric Theory, Cambridge University Press, vol. 9(02), pages 263-282, April.
  16. Andrews, Donald W K, 1991. "Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation," Econometrica, Econometric Society, vol. 59(3), pages 817-58, May.
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  19. Pierce, David A. & Haugh, Larry D., 1977. "Causality in temporal systems : Characterization and a survey," Journal of Econometrics, Elsevier, vol. 5(3), pages 265-293, May.
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  21. Lutz Kilian, 1998. "Confidence intervals for impulse responses under departures from normality," Econometric Reviews, Taylor & Francis Journals, vol. 17(1), pages 1-29.
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  23. Andrews, Donald W K, 1993. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Econometrica, Econometric Society, vol. 61(4), pages 821-56, July.
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  25. Hiro Y. Toda & Peter C.B. Phillips, 1991. "Vector Autoregression and Causality: A Theoretical Overview and Simulation Study," Cowles Foundation Discussion Papers 1001, Cowles Foundation for Research in Economics, Yale University.
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  27. Dufour, J.M. & Renault, E., 1995. "Short-Run and Long-Rub Causality in Time Series: Theory," Cahiers de recherche 9538, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  28. Wouter J. Den Haan & Andrew T. Levin, 1996. "A Practitioner's Guide to Robust Covariance Matrix Estimation," NBER Technical Working Papers 0197, National Bureau of Economic Research, Inc.
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  30. Andrews, Donald W K & Monahan, J Christopher, 1992. "An Improved Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimator," Econometrica, Econometric Society, vol. 60(4), pages 953-66, July.
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