Short and long run causality measures: Theory and inference
By Jean-Marie Dufour, Abderrahim Taamouti. 2008
98 citations recorded by the source corpus.
The concept of causality introduced by Wiener [Wiener, N., 1956. The theory of prediction, In: E.F. Beckenback, ed., The Theory of Prediction, McGraw-Hill, New York (Chapter 8)] and Granger [Granger, C. W.J., 1969. Investigating causal relations by econometric models and cross-spectral methods, Econometrica 37, 424-459] is defined in terms of predictability one period ahead. This concept can be generalized by considering causality at any given horizon h as well as tests for the corresponding non-causality [Dufour, J.-M., Renault, E., 1998. Short-run and long-run causality in time series: Theory. Econometrica 66, 1099-1125; Dufour, J.-M., Pelletier, D., Renault, E., 2006. Short run and long run causality in time series: Inference, Journal of Econometrics 132 (2), 337-362]. Instead of tests for non-causality at a given horizon, we study the problem of measuring causality between two vector processes. Existing causality measures have been defined only for the horizon 1, and they fail to capture indirect causality. We propose generalizations to any horizon h of the measures introduced by Geweke [Geweke, J., 1982. Measurement of linear dependence and feedback between multiple time series. Journal of the American Statistical Association 77, 304-313]. Nonparametric and parametric measures of unidirectional causality and instantaneous effects are considered. On noting that the causality measures typically involve complex functions of model parameters in VAR and VARMA models, we propose a simple simulation-based method to evaluate these measures for any VARMA model. We also describe asymptotically valid nonparametric confidence intervals, based on a bootstrap technique. Finally, the proposed measures are applied to study causality relations at different horizons between macroeconomic, monetary and financial variables in the US.
Subfields: Economics and Econometrics, Management Science and Operations Research
View Paper: https://www.semanticscholar.org/paper/9025c6ea8893bb218b7f42fe72aecdff08b0d514
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Citations in the corpus
- Exchange Rates and Commodity Prices : Measuring Causality at Multiple Horizons (2015, methodology): “It is much more informative to parameterize the relevant effects, compute point estimatesfor these parameters, and eventually confidence sets; see Dufour and Taamouti (2010) and Dufour, Garcia and Taamouti (2012).”
- A review of the Granger-causality fallacy (2015, background): “In the Award Ceremony Speech delivered on the occasion of being granted The Sveriges Riskbank Prize in Economic Sciences in Memory of Alfred Nobel, Granger admitted that the first two axioms were inspired by Hume’s ideas on causation (Dufour and Taamouti 2010).”