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VAR-Based Granger-Causality Test in the Presence of Instabilities

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  • Barbara Rossi
  • Yiru Wang

Abstract

In this article, we review Granger-causality tests robust to the presence of instabilities in a Vector Autoregressive framework. We also introduce the gcrobustvar command, which illustrates the procedure in Stata. In the presence of instabilities, the Granger-causality robust test is more powerful than the traditional Granger-causality test.

Suggested Citation

  • Barbara Rossi & Yiru Wang, 2019. "VAR-Based Granger-Causality Test in the Presence of Instabilities," Working Papers 1083, Barcelona School of Economics.
    • Handle: RePEc:bge:wpaper:1083
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    More about this item

    Keywords

    gcrobustvar; Granger-causality; VAR; instability; structural breaks; local projections;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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