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- Title
Testing for Granger (non-)causality in a time-varying coefficient VAR model.
- Authors
Christopoulos, Dimitris K.; León-Ledesma, Miguel A.
- Abstract
In this paper we propose Granger (non-)causality tests based on a VAR model allowing for time-varying coefficients. The functional form of the time-varying coefficients is a logistic smooth transition autoregressive (LSTAR) model using time as the transition variable. The model allows for testing Granger non-causality when the VAR is subject to a smooth break in the coefficients of the Granger causal variables. The proposed test then is applied to the money–output relationship using quarterly US data for the period 1952:2–2002:4. We find that causality from money to output becomes stronger after 1978:4 and the model is shown to have a good out-of-sample forecasting performance for output relative to a linear VAR model. Copyright © 2008 John Wiley & Sons, Ltd.
- Subjects
ECONOMIC forecasting; ECONOMIC statistics; MATHEMATICAL models of economic forecasting; CAUSATION (Philosophy); AUTOREGRESSION (Statistics); STOCHASTIC processes; REGRESSION analysis
- Publication
Journal of Forecasting, 2008, Vol 27, Issue 4, p293
- ISSN
0277-6693
- Publication type
Article
- DOI
10.1002/for.1060