GrangerCausality - ECON3300/7360 GRANGER CAUSALITY...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
ECON3300/7360 GRANGER CAUSALITY References: - The few pages on Causality (look under Contents page or the Index) in Ramanathan's Introductory Econometrics with Applications . - Pg 425-427 of the Mukerjee Text. ε + β + β = X Y 1 0 X causes Y To check if X causes Y (but not estimate the effect) Granger Causality Test If X causes Y and Y causes X feedback effects, bi-directional causality X and Y are jointly determined. E.g. Price of commodity and quantity of commodity sold. Does money SS cause changes in interest rate or the other way round? Is C = f (Y) or Y = f (C)? Consider the following structural model y t = σ x t + β 11 y t-1 + β 12 x t-1 + є 1t x t = γ y t + β 21 y t-1 + β 22 x t-1 + є 2t H 1 : γ = β 21 = 0 (Current and past influences of y do not affect x) H 2 : γ = 0 (Current influence of y does not affect x) endogeneity exogeneity Clive Granger 1969 article in Econometrica 1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
If γ ǂ 0 contemporeneous correlation between x and y i.e. x t and y t are correlated. Note
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 03/13/2010 for the course ECON econ1010 taught by Professor Margretfinch during the Three '08 term at Griffith.

Page1 / 5

GrangerCausality - ECON3300/7360 GRANGER CAUSALITY...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online