Testing for Granger (non-)causality in a time-varying coefficient VAR model

Dimitris Christopoulos and Miguel Leon-Ledesma

Journal of Forecasting, 2008, vol. 27, issue 4, 293-303

Abstract: In this paper we propose Granger (non-)causality tests based on a VAR model allowing for time-varying coefficients. The functional form of the time-varying coefficients is a logistic smooth transition autoregressive (LSTAR) model using time as the transition variable. The model allows for testing Granger non-causality when the VAR is subject to a smooth break in the coefficients of the Granger causal variables. The proposed test then is applied to the money-output relationship using quarterly US data for the period 1952:2-2002:4. We find that causality from money to output becomes stronger after 1978:4 and the model is shown to have a good out-of-sample forecasting performance for output relative to a linear VAR model. Copyright © 2008 John Wiley & Sons, Ltd.

Date: 2008
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Citations: View citations in EconPapers (9)

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Working Paper: Testing for Granger (non)-Causality in a Time Varying Coefficient VAR Model (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:jof:jforec:v:27:y:2008:i:4:p:293-303

DOI: 10.1002/for.1060

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