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A Comparison of Causality Tests Applied to the Bilateral Relationship between Consumption and GDP in the USA and Mexico

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  • Guisan, M.Carmen

Abstract

This article compares several methodologies for analysing unidirectional and bi-directional causality between Consumption and GDP in the USA, Mexico and other countries during the period 1960-2000. 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.

Suggested Citation

  • Guisan, M.Carmen, 2004. "A Comparison of Causality Tests Applied to the Bilateral Relationship between Consumption and GDP in the USA and Mexico," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 1(1), pages 115-130.
    • Handle: RePEc:eaa:ijaeqs:v:1:y2004:i:1_6
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    File URL: http://www.usc.es/economet/reviews/ijaeqs116.pdf
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    1. Canudas, Rocio, 2001. "Estudio Econometrico de la Influencia del Capital Humano en el Crecimiento de la Productividad Industrial de Mexico, 1960-1993," Estudios Economicos de Desarrollo Internacional, Euro-American Association of Economic Development, vol. 1(2).
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    Cited by:

    1. Ibrahim Ayoade Adekunle & Sheriffdeen Adewale Tella & Oluwaseyi Adedayo Adelowokan, 2021. "Macroeconomic policy volatility and household consumption in Africa," SN Business & Economics, Springer, vol. 1(3), pages 1-22, March.
    2. Chew Ging LEE, 2010. "The Nexus of Outward Foreign Direct Investment and Income: Evidence from Singapore," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 10(1).
    3. GUISAN, Maria-Carmen, 2011. "Industry, Foreign Trade and Employment in EU Countries; Comparison of France, Germany, Italy, Spain and the UK with the United States," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 11(2).
    4. Guisan, M.C. & Exposito, P., 2013. "Employment, Production and Income by Sector in Spain: Econometric Models and Comparison with Germany and the United States, 1965-2010," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 13(1), pages 78-90.
    5. Shu‐Yi Liao & Lan‐Hsun Wang & Mao‐Lung Huang, 2019. "Does More Consumption Promote Real GDP Growth?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 66(3), pages 384-403, July.
    6. GUISAN, Maria-Carmen, 2024. "Causality Tests In Spain. 1960-2021: Development, Industry, Investment Per Capita And Financial Indicators," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 24(1), pages 147-172.
    7. GORMUS Sakir & GUNES, Sevcan, 2010. "Consumer Confidence, Stock Prices And Exchange Rates: The Case Of Turkey," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 10(2).
    8. W A Razzak, 2007. "A Perspective on Unit Root and Cointegration in Applied Macroeconomics," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 4(1), pages 77-102.
    9. GUISAN, Maria-Carmen, 2011. "Industry, Fair Competition And Trade In Oecd Countries: Impact On Wages And On Employment By Sector, 2000-2010," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 11(2).
    10. Mustafa Akal, 2006. "Causalities Among Growth Related Policy Variables In Turkey, 1950-2004," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 6(3).
    11. SHUBITA, Moade Fawzi & AL-SHARKAS, Adel A., 2010. "A Study Of Size Effect And Macroeconomics Factors In New York Stock Exchange Stock Returns," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 10(2).

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      JEL classification:

      • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
      • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
      • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
      • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada
      • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
      • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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