Simulation Evidence on Granger Causality in Presence of a Confounding Variable

Zahid Asghar

International Journal of Applied Econometrics and Quantitative Studies, 2008, vol. 5, issue 2

Abstract: This paper provides simulation evidence on Granger causality between two variables when they are jointly caused by a third variable. Four Data Generating Processes (DGPs) are considered for testing causality by Granger method and two DGPs for testing causality by Toda and Yamamoto (1995) procedure. Our simulation involve three variables but causality has been tested only between two variable and the third variable (the real cause) has been ignored to show that its association which matters in these causality tests. Nevertheless, if we know that there are only two variables in economic dynamics and the true model is known then these causality tests work fine and for this we have carried out bootstrap simulation.

Keywords: Granger Causality; Toda and Yamamoto Procedure; Monte Carlo Simulation; Causation and Association; Bootstrap Simulation (search for similar items in EconPapers)
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.usc.es/economet/reviews/ijaeqs526.pdf
No

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eaa:ijaeqs:v:5:y2008:i:2_6

Ordering information: This journal article can be ordered from
http://www.usc.es/economet/info.htm

Access Statistics for this article

More articles in International Journal of Applied Econometrics and Quantitative Studies from Euro-American Association of Economic Development
Bibliographic data for series maintained by M. Carmen Guisan ().