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Determining causal inference in linear and non-linear time-series using convergent cross mapping. An application of government expenditure and economic growth relation in Mexico 1980-2015

Author

Listed:
  • Rubi Tonantzin Gutiérrez Villanueva

    (Division of Economics, CIDE)

Abstract

This study has two major purposes: (1) to identify casual inference in time-series using Granger causality tests and Convergent Cross Mapping (Sugihara et. al., 2012) and (2) to investigate the economic growth and government expenditure relation in Mexico. Convergent Cross Mapping (CCM) has shown a high potential to perform casual inference in complex systems and non-linear system and has been used as an alternative approach to Granger causality. On the other hand, we show that CCM fails to infer causality direction in linear time-series and in time-series with structural breaks. On the other hand, we demostrate that Toda-Yamamoto test (Toda and Yamamoto, 1995) succesfully detects causal relation linear systems and systems with structural breaks. Besides, we evaluate the causal relation between government expenditure and economic growth in Mexico then we evaluate the validity of Wagner's law and the Keynesian view. The empirical results suggests that Wagner's law holds for Mexico for the period 1980 to 2010.

Suggested Citation

  • Rubi Tonantzin Gutiérrez Villanueva, 2016. "Determining causal inference in linear and non-linear time-series using convergent cross mapping. An application of government expenditure and economic growth relation in Mexico 1980-2015," Graduate theses (Spanish) TESG 008, CIDE, División de Economía.
    • Handle: RePEc:emc:thgrad:tesg008
    as

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    References listed on IDEAS

    as
    1. Muthi Samudram & Mahendhiran Nair & Santha Vaithilingam, 2009. "Keynes and Wagner on government expenditures and economic development: the case of a developing economy," Empirical Economics, Springer, vol. 36(3), pages 713-713, June.
    2. 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.
    3. Muthi Samudram & Mahendhiran Nair & Santha Vaithilingam, 2009. "Keynes and Wagner on government expenditures and economic development: the case of a developing economy," Empirical Economics, Springer, vol. 36(3), pages 697-712, June.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Causality; Convergent Cross Mapping; Granger Causality Tests; Government Expenditure; Economic Growth; Mexico.;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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