Vector Autoregression and Causality

Hiro Y. Toda and Peter Phillips

No 977, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: This paper develops a complete limit theory for Wald tests of Granger causality in levels vector autoregression (VAR's) and Johansen-type error correction models (ECM's) allowing for the presence of stochastic trends and cointegration. Earlier work by Sims, Stock and Watson (1990) on trivariate VAR systems is extended to the general case, thereby formally characterizing the circumstances when these Wald tests are asymptotically valid as chi-square criteria. Our results for inference from unrestricted levels VAR are not encouraging.

Keywords: Error correction model; exogeneity; Granger causality; vector autoregression (search for similar items in EconPapers)
JEL-codes: C12 C32 C52 (search for similar items in EconPapers)
Pages: 51 pages
Date: 1991-05
Note: CFP 858.
References: Add references at CitEc
Citations: View citations in EconPapers (21)

Published in Econometrica (November 1993), 61(6): 1367-1393

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