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Improved Tests for Granger Non-Causality in Panel Data

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  • Xiao, Jiaqi
  • Juodis, Arturas
  • Karavias, Yiannis
  • Sarafidis, Vasilis
  • Ditzen, Jan

Abstract

This article introduces the xtgranger command in Stata, which implements the panel Granger non-causality test approach developed by Juodis et al. (2021). This test offers superior size and power performance to existing tests, which stems from the use of a pooled estimator that has a faster sqrt(NT) convergence rate. The test has several other useful properties; it can be used in multivariate systems, it has power against both homogeneous as well as heterogeneous alternatives, and it allows for cross-section dependence and cross-section heteroskedasticity.

Suggested Citation

  • Xiao, Jiaqi & Juodis, Arturas & Karavias, Yiannis & Sarafidis, Vasilis & Ditzen, Jan, 2022. "Improved Tests for Granger Non-Causality in Panel Data," MPRA Paper 114231, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:114231
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    References listed on IDEAS

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    1. Geert Dhaene & Koen Jochmans, 2015. "Split-panel Jackknife Estimation of Fixed-effect Models," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 82(3), pages 991-1030.
    2. Juodis, Artūras & Sarafidis, Vasilis, 2022. "An incidental parameters free inference approach for panels with common shocks," Journal of Econometrics, Elsevier, vol. 229(1), pages 19-54.
    3. Dumitrescu, Elena-Ivona & Hurlin, Christophe, 2012. "Testing for Granger non-causality in heterogeneous panels," Economic Modelling, Elsevier, vol. 29(4), pages 1450-1460.
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    16. Artūras Juodis & Yiannis Karavias & Vasilis Sarafidis, 2021. "A homogeneous approach to testing for Granger non-causality in heterogeneous panels," Empirical Economics, Springer, vol. 60(1), pages 93-112, January.
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    18. Yiannis Karavias & Elias Tzavalis, 2017. "Local power of panel unit root tests allowing for structural breaks," Econometric Reviews, Taylor & Francis Journals, vol. 36(10), pages 1123-1156, November.
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    More about this item

    Keywords

    Panel data; Granger causality; Nickell bias; Heterogeneous panels; Halfpanel Jackknife; Cross-section dependence; xtgranger.;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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