IDEAS home Printed from https://ideas.repec.org/p/arx/papers/2106.07612.html
   My bibliography  Save this paper

Dynamic Asymmetric Causality Tests with an Application

Author

Listed:
  • Abdulnasser Hatemi-J

Abstract

Testing for causation, defined as the preceding impact of the past values of one variable on the current value of another one when all other pertinent information is accounted for, is increasingly utilized in empirical research of the time-series data in different scientific disciplines. A relatively recent extension of this approach has been allowing for potential asymmetric impacts since it is harmonious with the way reality operates in many cases according to Hatemi-J (2012). The current paper maintains that it is also important to account for the potential change in the parameters when asymmetric causation tests are conducted, as there exists a number of reasons for changing the potential causal connection between variables across time. The current paper extends therefore the static asymmetric causality tests by making them dynamic via the usage of subsamples. An application is also provided consistent with measurable definitions of economic or financial bad as well as good news and their potential interaction across time.

Suggested Citation

  • Abdulnasser Hatemi-J, 2021. "Dynamic Asymmetric Causality Tests with an Application," Papers 2106.07612, arXiv.org, revised Jun 2021.
    • Handle: RePEc:arx:papers:2106.07612
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/2106.07612
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Hacker, Scott & Hatemi-J, Abdulnasser, 2010. "The Properties of Procedures Dealing with Uncertainty about Intercept and Deterministic Trend in Unit Root Testing," Working Paper Series in Economics and Institutions of Innovation 214, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    2. Joseph E. Stiglitz, 1974. "Incentives and Risk Sharing in Sharecropping," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(2), pages 219-255.
    3. A. Hatemi-J, 2003. "A new method to choose optimal lag order in stable and unstable VAR models," Applied Economics Letters, Taylor & Francis Journals, vol. 10(3), pages 135-137.
    4. Bahmani-Oskooee, Mohsen & Chang, Tsangyao & Ranjbar, Omid, 2016. "Asymmetric causality using frequency domain and time-frequency domain (wavelet) approaches," Economic Modelling, Elsevier, vol. 56(C), pages 66-78.
    5. Helmut Lütkepohl, 2005. "New Introduction to Multiple Time Series Analysis," Springer Books, Springer, number 978-3-540-27752-1, December.
    6. R. Scott Hacker & Abdulnasser Hatemi-J, 2005. "A test for multivariate ARCH effects," Applied Economics Letters, Taylor & Francis Journals, vol. 12(7), pages 411-417.
    7. R. Scott Hacker & Abdulnasser Hatemi-J, 2006. "Tests for causality between integrated variables using asymptotic and bootstrap distributions: theory and application," Applied Economics, Taylor & Francis Journals, vol. 38(13), pages 1489-1500.
    8. Joakim Westerlund, 2007. "Testing for Error Correction in Panel Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 69(6), pages 709-748, December.
    9. Hatemi-J, Abdulnasser, 2004. "Multivariate tests for autocorrelation in the stable and unstable VAR models," Economic Modelling, Elsevier, vol. 21(4), pages 661-683, July.
    10. Scott Hacker & Abdulnasser Hatemi‐J, 2012. "A bootstrap test for causality with endogenous lag length choice: theory and application in finance," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 39(2), pages 144-160, May.
    11. Hatemi-J, Abdulnasser & Mustafa, Alan, 2016. "A MS-Excel Module to Transform an Integrated Variable into Cumulative Partial Sums for Negative and Positive Components with and without Deterministic Trend Parts," MPRA Paper 73813, University Library of Munich, Germany.
    12. Youssef El-Khatib & Abdulnasser Hatemi-J, 2017. "ASYM_CAUS: C++ module for Transforming an Integrated Variable with Deterministic Trend Parts into Negative and Positive Cumulative Partial Sums," Statistical Software Components CPP001, Boston College Department of Economics.
    13. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    14. Abdulnasser Hatemi-J & Youssef El-Khatib, 2016. "An extension of the asymmetric causality tests for dealing with deterministic trend components," Applied Economics, Taylor & Francis Journals, vol. 48(42), pages 4033-4041, September.
    15. Abdulnasser Hatemi-J & Alan Mustafa, 2016. "TDICPS: OCTAVE module to Transform an Integrated Variable into Cumulative Partial Sums for Negative and Positive Components with Deterministic Trend Parts," Statistical Software Components OCT001, Boston College Department of Economics.
    16. Granger, Clive W J, 1986. "Developments in the Study of Cointegrated Economic Variables," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 213-228, August.
    17. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
    18. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
    19. Granger, C. W. J., 1988. "Some recent development in a concept of causality," Journal of Econometrics, Elsevier, vol. 39(1-2), pages 199-211.
    20. Brunner, Karl & Meltzer, Allan H., 1976. "The Phillips curve," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 1-18, January.
    21. Sims, Christopher A, 1972. "Money, Income, and Causality," American Economic Review, American Economic Association, vol. 62(4), pages 540-552, September.
    22. Toda, Hiro Y. & Yamamoto, Taku, 1995. "Statistical inference in vector autoregressions with possibly integrated processes," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 225-250.
    23. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
    24. Abdulnasser Hatemi-J, 2012. "Asymmetric causality tests with an application," Empirical Economics, Springer, vol. 43(1), pages 447-456, August.
    25. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 87(3), pages 355-374.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Cooray, Arusha & Gangopadhyay, Partha & Das, Narasingha, 2023. "Causality between volatility and the weekly economic index during COVID-19: The predictive power of efficient markets and rational expectations," International Review of Financial Analysis, Elsevier, vol. 89(C).
    2. Selim Yildirim & Bilge Kagan zdemir & Burhan Dogan, 2013. "Financial Development and Economic Growth Nexus in Emerging European Economies: New Evidence from Asymmetric Causality," International Journal of Economics and Financial Issues, Econjournals, vol. 3(3), pages 710-722.
    3. Huang, Linxian, 2024. "The relationship between cryptocurrencies and convention financial market: Dynamic causality test and time-varying influence," International Review of Economics & Finance, Elsevier, vol. 91(C), pages 811-826.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hatemi-J, Abdulnasser, 2020. "Asymmetric Panel Causality Tests with an Application to the Impact of Fiscal Policy on Economic Performance in Scandinavia," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 73(3), pages 389-404.
    2. Abdulnasser Hatemi-J, 2012. "Asymmetric causality tests with an application," Empirical Economics, Springer, vol. 43(1), pages 447-456, August.
    3. Gunay, Samet, 2020. "Seeking causality between liquidity risk and credit risk: TED-OIS spreads and CDS indexes," Research in International Business and Finance, Elsevier, vol. 52(C).
    4. Al Janabi, Mazin A.M. & Hatemi-J, Abdulnasser & Irandoust, Manuchehr, 2010. "An empirical investigation of the informational efficiency of the GCC equity markets: Evidence from bootstrap simulation," International Review of Financial Analysis, Elsevier, vol. 19(1), pages 47-54, January.
    5. Sarmiento, Julio & Cayon, Edgardo & Collazos, María & Sandoval, Juan S., 2017. "Positive asymmetric information in volatile environments: The black market dollar and sovereign bond yields in Venezuela," Research in International Business and Finance, Elsevier, vol. 41(C), pages 547-555.
    6. Abdulnasser Hatemi-J & Abdulrahman Al Shayeb & Eduardo Roca, 2017. "The effect of oil prices on stock prices: fresh evidence from asymmetric causality tests," Applied Economics, Taylor & Francis Journals, vol. 49(16), pages 1584-1592, April.
    7. Abdulnasser Hatemi-J & Youssef El-Khatib, 2016. "An extension of the asymmetric causality tests for dealing with deterministic trend components," Applied Economics, Taylor & Francis Journals, vol. 48(42), pages 4033-4041, September.
    8. Abdulnasser Hatemi-J, 2024. "Efficient Asymmetric Causality Tests," Papers 2408.03137, arXiv.org, revised Oct 2024.
    9. Abdulnasser Hatemi-J & Eduardo Roca, 2005. "Exchange rates and stock prices interaction during good and bad times: evidence from the ASEAN4 countries," Applied Financial Economics, Taylor & Francis Journals, vol. 15(8), pages 539-546.
    10. John D. Levendis, 2018. "Time Series Econometrics," Springer Texts in Business and Economics, Springer, number 978-3-319-98282-3, June.
    11. Stéphane Goutte & David Guerreiro & Bilel Sanhaji & Sophie Saglio & Julien Chevallier, 2019. "International Financial Markets," Post-Print halshs-02183053, HAL.
    12. Hatemi-J, Abdulnasser & Mustafa, Alan, 2016. "Testing for Financial Market Integration of the Chinese Market with the US Market," MPRA Paper 72733, University Library of Munich, Germany.
    13. R. Scott Hacker & Abdulnasser Hatemi-J, 2006. "Tests for causality between integrated variables using asymptotic and bootstrap distributions: theory and application," Applied Economics, Taylor & Francis Journals, vol. 38(13), pages 1489-1500.
    14. Hatemi-J, Abdulnasser & Mustafa, Alan, 2016. "A MS-Excel Module to Transform an Integrated Variable into Cumulative Partial Sums for Negative and Positive Components with and without Deterministic Trend Parts," MPRA Paper 73813, University Library of Munich, Germany.
    15. Abdulnasser Hatemi-J, 2020. "Bear Markets and Recessions versus Bull Markets and Expansions," Papers 2009.01343, arXiv.org, revised Nov 2020.
    16. Camgöz, Mevlüt & Topal, Mehmet Hanefi, 2022. "Identifying the asymmetric price dynamics of Islamic equities: Implications for international investors," Research in International Business and Finance, Elsevier, vol. 60(C).
    17. Xiaojuan He & Dervis Kirikkaleli & Melike Torun & Zecheng Li, 2021. "Modeling Economic Risk in the QISMUT Countries: Evidence From Nonlinear Cointegration Tests," SAGE Open, , vol. 11(4), pages 21582440211, October.
    18. Mustafa Serdar Basoglu & Turhan Korkmaz & Emrah Ismail Cevik, 2014. "London Metal Exchange: Causality Relationship between the Price Series of Non-Ferrous Metal Contracts," International Journal of Economics and Financial Issues, Econjournals, vol. 4(4), pages 726-734.
    19. Wang, Lu & Ma, Feng & Niu, Tianjiao & Liang, Chao, 2021. "The importance of extreme shock: Examining the effect of investor sentiment on the crude oil futures market," Energy Economics, Elsevier, vol. 99(C).
    20. Lukasz Lach, 2010. "Application of Bootstrap Methods in Investigation of Size of the Granger Causality Test for Integrated VAR Systems," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 8(2), pages 167-186.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:2106.07612. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.