Nonparametric estimation and inference for Granger causality measures

Taoufik Bouezmarni and Anouar El Ghouch
Authors registered in the RePEc Author Service: Abderrahim Taamouti

UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía

Abstract: We propose a nonparametric estimator and a nonparametric test for Granger causality measures that quantify linear and nonlinear Granger causality in distribution between random variables. We first show how to write the Granger causality measures in terms of copula densities. We suggest a consistent estimator for these causality measures based on nonparametric estimators of copula densities. Further, we prove that the nonparametric estimators are asymptotically normally distributed and we discuss the validity of a local smoothed bootstrap that we use in finite sample settings to compute a bootstrap bias-corrected estimator and test for our causality measures. A simulation study reveals that the bias-corrected bootstrap estimator of causality measures behaves well and the corresponding test has quite good finite sample size and power properties for a variety of typical data generating processes and different sample sizes. Finally, we illustrate the practical relevance of nonparametric causality measures by quantifying the Granger causality between S&P500 Index returns and many exchange rates (US/Canada, US/UK and US/Japen exchange rates).

Keywords: Causality; measures; Nonparametric; estimation; Time; series; Copulas; Bernstein; copula; density; Local; bootstrap; Conditional; distribution; function; Stock; returns (search for similar items in EconPapers)
JEL-codes: C12 C14 C15 C19 E3 E4 G1 G12 (search for similar items in EconPapers)
Date: 2012-03-29
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Nonparametric Estimation and Inference for Granger Causality Measures (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:cte:werepe:14150

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