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Searching for the Causal Structure of a Vector Autoregression*

Selva Demiralp and Kevin Hoover ()

Oxford Bulletin of Economics and Statistics, 2003, vol. 65, issue s1, 745-767

Abstract: We provide an accessible introduction to graph‐theoretic methods for causal analysis. Building on the work of Swanson and Granger (Journal of the American Statistical Association, Vol. 92, pp. 357–367, 1997), and generalizing to a larger class of models, we show how to apply graph‐theoretic methods to selecting the causal order for a structural vector autoregression (SVAR). We evaluate the PC (causal search) algorithm in a Monte Carlo study. The PC algorithm uses tests of conditional independence to select among the possible causal orders – or at least to reduce the admissible causal orders to a narrow equivalence class. Our findings suggest that graph‐theoretic methods may prove to be a useful tool in the analysis of SVARs.

Date: 2003
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Oxford Bulletin of Economics and Statistics is currently edited by Christopher Adam, Anindya Banerjee, Christopher Bowdler, David Hendry, Adriaan Kalwij, John Knight and Jonathan Temple

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