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Looking behind Granger causality

Author

Listed:
  • Chen, Pu
  • Hsiao, Chih-Ying

Abstract

Granger causality as a popular concept in time series analysis is widely applied in empirical research. The interpretation of Granger causality tests in a cause-effect context is, however, often unclear or even controversial, so that the causality label has faded away. Textbooks carefully warn that Granger causality does not imply true causality and preferably refer the Granger causality test to a forecasting technique. Applying theory of inferred causation, we develop in this paper a method to uncover causal structures behind Granger causality. In this way we re-substantialize the causal attribution in Granger causality through providing an causal explanation to the conditional dependence manifested in Granger causality.

Suggested Citation

  • Chen, Pu & Hsiao, Chih-Ying, 2010. "Looking behind Granger causality," MPRA Paper 24859, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:24859
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    File URL: https://mpra.ub.uni-muenchen.de/24859/1/MPRA_paper_24859.pdf
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    References listed on IDEAS

    as
    1. Chen Pu & Flaschel Peter, 2006. "Measuring the Interaction of Wage and Price Phillips Curves for the U.S. Economy," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 10(4), pages 1-35, December.
    2. Eichler, Michael, 2007. "Granger causality and path diagrams for multivariate time series," Journal of Econometrics, Elsevier, vol. 137(2), pages 334-353, April.
    3. Chen, Pu & Chihying, Hsiao, 2007. "Learning Causal Relations in Multivariate Time Series Data," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 1, pages 1-43.
    4. Granger, C. W. J., 1980. "Testing for causality : A personal viewpoint," Journal of Economic Dynamics and Control, Elsevier, vol. 2(1), pages 329-352, May.
    5. James M. Robins, 2003. "Uniform consistency in causal inference," Biometrika, Biometrika Trust, vol. 90(3), pages 491-515, September.
    6. Krolzig, Hans-Martin & Peter Flaschel, 2003. "Wage and Price Phillips Curves," Royal Economic Society Annual Conference 2003 128, Royal Economic Society.
    7. Chen, Pu, 2010. "A time series causal model," MPRA Paper 24841, University Library of Munich, Germany.
    8. Hoover, Kevin D., 2005. "Automatic Inference Of The Contemporaneous Causal Order Of A System Of Equations," Econometric Theory, Cambridge University Press, vol. 21(01), pages 69-77, February.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Georgeta VINTILA & Ioana Laura TIBULCA, 2014. "Can the Corporate Tax Burden be used to predict the Evolution of Business Confidence?," Romanian Statistical Review Supplement, Romanian Statistical Review, vol. 62(1), pages 143-150, January.
    2. repec:eee:enepol:v:110:y:2017:i:c:p:609-618 is not listed on IDEAS

    More about this item

    Keywords

    Granger Causality; Time Series Causal Model; Graphical Model;

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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