Non-causality due to irrelevant lag polynomials

Kul Luintel ()

Applied Economics Letters, 1999, vol. 6, issue 1, 17-20

Abstract: This letter illustrates that Granger causality tests tend to be sensitive to irrelevant lag polynomials and could lead to wrong inference of non-causality. In view of the little insight one gets from economic theory about short-run dynamics, it suggests exclusion restrictions prior to causality testing.

Date: 1999
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DOI: 10.1080/135048599353807

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