How Large are the Effects of Simultaneity on Testing Granger Causality?

Autor(en): Wilde, Joachim 
Stichwörter: Business & Economics; COUNTRIES; ECONOMIC-GROWTH; Economics; Granger causality; instantaneous causality; Mathematical Methods In Social Sciences; simultaneity; Social Sciences, Mathematical Methods; test
Erscheinungsdatum: 2015
Herausgeber: WALTER DE GRUYTER GMBH
Journal: JAHRBUCHER FUR NATIONALOKONOMIE UND STATISTIK
Volumen: 235
Ausgabe: 3
Startseite: 320
Seitenende: 328
Zusammenfassung: 
Interpreting Granger causality as economic causality implies that the underlying VAR model is a structural economic model. This is wrong in the case of simultaneity, and causal conclusions can be misleading. Nevertheless, the empirical relevance of this problem still needs to be determined. Therefore, the 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. Thus, policy conclusions from Granger causality tests can be wrong with probability one if simultaneity occurs. Furthermore, the power of the test can be rather low even with a sample size of T = 50.
ISSN: 00214027

Show full item record

Page view(s)

4
Last Week
1
Last month
0
checked on Feb 28, 2024

Google ScholarTM

Check