Paper #1495

Title:

Testing subspace Granger causality

Author:

Majid M. Al-Sadoon

Date:

November 2015

Abstract:

The methodology of multivariate Granger non-causality testing at various horizons is extended to allow for inference on its directionality. This paper presents empirical manifestations of these subspaces and provides useful interpretations for them. It then proposes methods for estimating these subspaces and finding their dimensions utilizing simple vector autoregressions modelling that is easy to implement. The methodology is illustrated by an application to empirical monetary policy.

Keywords:

Granger causality, VAR model, rank testing, Okun's law, policy trade-offs.

JEL codes:

C12, C13, C15, C32, C53, E3, E4, E52.

Area of Research:

Statistics, Econometrics and Quantitative Methods

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