A theoretical and simulation analysis on the power of the frequency domain causality test

Yanfeng Wei, Liguo Zhang, Xiaoying Guo and Ting Yang

Statistics & Probability Letters, 2021, vol. 170, issue C

Abstract: The power of the frequency domain causality test proposed by Breitung and Candelon (2006) is analyzed. We show that the power of the test is closely related to the root of the VAR model. When the root of the VAR model is near 1 or −1, the test may have a maximal power at the frequencies close to 0 or π.

Keywords: Frequency; Causality test; Power; Monte Carlo (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.spl.2020.108970

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