Testing subspace Granger causality
Econometrics and Statistics, 2019, vol. 9, issue C, 42-61
The methodology of multivariate Granger non-causality testing at various horizons is extended to allow for inference on its directionality. Empirical manifestations of these subspaces are presented and useful interpretations for them are provided. Simple vector autoregressive models are used to estimate these subspaces and to find their dimensions. The methodology is illustrated by an application to empirical monetary policy, where a conditional form of Okun’s law is demonstrated as well as a statistical monetary policy reaction function to oil price changes.
Keywords: Granger causality; VAR model; Rank testing; Okun’s law; Policy trade-offs (search for similar items in EconPapers)
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Working Paper: Testing Subspace Granger Causality (2016)
Working Paper: Testing subspace Granger causality (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosta:v:9:y:2019:i:c:p:42-61
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