Causality Analysis: The study of Size and Power based on riz-PC Algorithm of Graph Theoretic Approach

Rizwan Fazal, Muhammad Bhatti and Atiq Ur Rehman

Technological Forecasting and Social Change, 2022, vol. 180, issue C

Abstract: This paper proposes modified Peter and Clark (PC) algorithm of graph-theoretic approach to study causality correlated data. The proposed algorithm is derived to determine the directions of the casual correlated complex variables. The PC algorithm treats VAR residuals as original variables while the proposed algorithm riz-PC uses modified R recursive residuals to find the correct causal direction among policy variables. This study evaluates the performance of these causal search algorithms in term of size and power properties. Our findings suggest that the newly proposed modified riz-PC algorithm can test causality better, as it successfully depicted the correct causal direction and was best at differentiating between true and spurious causality in routine Monte Carlo experiments.

Keywords: Graph theory; Causality; Riz-PC algorithm; Simulations (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:tefoso:v:180:y:2022:i:c:s0040162522002189

DOI: 10.1016/j.techfore.2022.121691

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