Vector Autoregressions and Causality

Vector Autoregressions and Causality

This paper develops a limit theory for Wald tests of Granger causality in levels vector autoregressions (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...

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Veröffentlicht in:Econometrica. - Wiley. - 61(1993), 6, Seite 1367-1393
1. Verfasser: Toda, Hiro Y. (VerfasserIn)
Format: Online-Aufsatz
Sprache:English
Veröffentlicht: 1993
Zugriff auf das übergeordnete Werk:Econometrica
Schlagworte:Error correction model exogeneity Granger causality maximum likelihood nonstandard limit theory nuisance parameters vector autoregression Wald test Philosophy Mathematics Physical sciences
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520 |a This paper develops a limit theory for Wald tests of Granger causality in levels vector autoregressions (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 χ <sup>2</sup> criteria. Our results for inference from unrestricted levels VAR are not encouraging. We show that without explicit information on the number of unit roots in the system and the rank of certain submatrices in the cointegration space it is impossible to determine the appropriate limit theory in advance; and, even when such information is available, the limit theory often involves both nuisance parameters and nonstandard distributions, a situation where there is no satisfactory statistical basis for mounting these tests. The situation with regard to the use of causality tests in ECM's is also complex but more encouraging. Granger causality tests in ECM's also suffer from nuisance parameter dependencies asymptotically and, in some cases that we make explicit, nonstandard limit theory. Both these results are somewhat surprising in the light of earlier research on the validity of asymptotic χ <sup>2</sup> criteria in such systems. In spite of these difficulties, Johansen-type ECM's do offer a sound basis for empirical testing of the rank of the cointegration space and the rank of key submatrices that influence the asymptotics. 
540 |a Copyright 1993 Econometric Society 
650 4 |a Error correction model 
650 4 |a exogeneity 
650 4 |a Granger causality 
650 4 |a maximum likelihood 
650 4 |a nonstandard limit theory 
650 4 |a nuisance parameters 
650 4 |a vector autoregression 
650 4 |a Wald test 
650 4 |a Philosophy  |x Metaphysics  |x Etiology  |x Causality 
650 4 |a Mathematics  |x Applied mathematics  |x Statistics  |x Applied statistics  |x Statistical models  |x Vector autoregression 
650 4 |a Philosophy  |x Applied philosophy  |x Philosophy of science  |x Scientific method  |x Hypothesis testing  |x Null hypothesis 
650 4 |a Physical sciences  |x Physics  |x Mechanics  |x Fluid mechanics  |x Brownian motion 
650 4 |a Mathematics  |x Pure mathematics  |x Linear algebra  |x Matrix theory  |x Matrices  |x Covariance matrices 
650 4 |a Mathematics  |x Applied mathematics  |x Statistics  |x Applied statistics  |x Inferential statistics  |x Statistical estimation  |x Estimation methods  |x Estimators 
650 4 |a Mathematics  |x Pure mathematics  |x Linear algebra  |x Vector analysis  |x Mathematical vectors 
650 4 |a Mathematics  |x Applied mathematics  |x Analytics  |x Analytical estimating  |x Maximum likelihood estimation 
650 4 |a Mathematics  |x Pure mathematics  |x Linear algebra  |x Matrix theory  |x Matrices 
650 4 |a Mathematics  |x Applied mathematics  |x Statistics  |x Applied statistics  |x Statistical models  |x Parametric models 
655 4 |a research-article 
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773 1 8 |g volume:61  |g year:1993  |g number:6  |g pages:1367-1393 
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