Pitfalls in Using Granger Causality Tests to Find an Engine of Growth
Resource
Applied Economic Letters, 9, 411-414
Journal
Applied Economics Letters
Pages
411-414
Date Issued
2000
Date
2000
Author(s)
林向愷
Lee, Hsiu-Yun
Wu, Jyh-Lin
Abstract
This paper discusses the reliability of using a Granger causality test to find an engine of growth. The paper first focuses on growth models' cointegration implications since causality must exist in an error-correction model. As a complementary, Monte Carlo experiments with independently generated I(1) variables also indicate a significant probability for rejecting the Granger non-causality null. Given the persistency and cointegration of variables in growth models, rejecting the non-causality null may reflect a spurious causal relationship, rather than confirm a theoretical causality.
SDGs
Other Subjects
economic growth; Granger causality test; growth determination; testing method
Type
journal article
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