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Looking behind Granger causality

Author

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  • Chen, Pu
  • Hsiao, Chih-Ying

Abstract

Granger causality as a popular concept in time series analysis is widely applied in empirical research. The interpretation of Granger causality tests in a cause-effect context is, however, often unclear or even controversial, so that the causality label has faded away. Textbooks carefully warn that Granger causality does not imply true causality and preferably refer the Granger causality test to a forecasting technique. Applying theory of inferred causation, we develop in this paper a method to uncover causal structures behind Granger causality. In this way we re-substantialize the causal attribution in Granger causality through providing an causal explanation to the conditional dependence manifested in Granger causality.

Suggested Citation

  • Chen, Pu & Hsiao, Chih-Ying, 2010. "Looking behind Granger causality," MPRA Paper 24859, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:24859
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    File URL: https://mpra.ub.uni-muenchen.de/24859/1/MPRA_paper_24859.pdf
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    References listed on IDEAS

    as
    1. Chen, Pu & Chihying, Hsiao, 2007. "Learning Causal Relations in Multivariate Time Series Data," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 1, pages 1-43.
    2. James M. Robins, 2003. "Uniform consistency in causal inference," Biometrika, Biometrika Trust, vol. 90(3), pages 491-515, September.
    3. Krolzig, Hans-Martin & Peter Flaschel, 2003. "Wage and Price Phillips Curves," Royal Economic Society Annual Conference 2003 128, Royal Economic Society.
    4. Chen Pu & Flaschel Peter, 2006. "Measuring the Interaction of Wage and Price Phillips Curves for the U.S. Economy," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 10(4), pages 1-35, December.
    5. Eichler, Michael, 2007. "Granger causality and path diagrams for multivariate time series," Journal of Econometrics, Elsevier, vol. 137(2), pages 334-353, April.
    6. Granger, C. W. J., 1980. "Testing for causality : A personal viewpoint," Journal of Economic Dynamics and Control, Elsevier, vol. 2(1), pages 329-352, May.
    7. Chen, Pu, 2010. "A time series causal model," MPRA Paper 24841, University Library of Munich, Germany.
    8. Hoover, Kevin D., 2005. "Automatic Inference Of The Contemporaneous Causal Order Of A System Of Equations," Econometric Theory, Cambridge University Press, vol. 21(1), pages 69-77, February.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

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    2. Ma, Shao-Chao & Fan, Ying & Feng, Lianyong, 2017. "An evaluation of government incentives for new energy vehicles in China focusing on vehicle purchasing restrictions," Energy Policy, Elsevier, vol. 110(C), pages 609-618.

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    More about this item

    Keywords

    Granger Causality; Time Series Causal Model; Graphical Model;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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