Causality Tests, Interdependence and Model Selection: Aplication to OECD countries 1960-97

Maria-Carmen Guisan

Economic Development from University of Santiago de Compostela. Faculty of Economics and Business. Econometrics.

Abstract: This paper compares several methodologies for analysing unidirectional and bi-directional causality between Consumption and GDP in 25 OECD countries during the period 1960-95. For analysing unilateral causality a comparison is made between cointegration tests and joint regression on alternative explanatory variables, with 100% of correct results in the case of joint regression and lower percentages of success for cointegration approach. Bilateral causality is analysed comparing Granger´s test, a modified version of Granger´s test here suggested, TSLS, Hausman´s causality test and other approaches. The main conclusion is that the modified version of Granger´s test performs rather well and that Hausman´s test is very often useful for reinforcing the conclusions of multiple equations models with contemporaneous interdependence. Regarding the bilateral relationship between Consumption and GDP we conclude that there is a moderate degree of contemporaneous relation, with a high degree of dependence of Private Consumption on GDP and a lower dependence in the case of the reverse relation, because GDP is more dependent on supply side conditions than on demand side. This result is relevant for economic policies in less developed countries where very often emphasis is made more in the reverse relations than in the main ones.

JEL-codes: C5 C52 E2 O57 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.usc.es/economet/aeeadepdf/aeeade63.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eaa:ecodev:63

Access Statistics for this paper

More papers in Economic Development from University of Santiago de Compostela. Faculty of Economics and Business. Econometrics. Contact information at EDIRC.
Bibliographic data for series maintained by M. Carmen Guisan (mcarmen.guisan@usc.es).