TY - JOUR
T1 - Testing Instantaneous Causality in Presence of Nonconstant Unconditional Covariance
AU - Giai Gianetto, Quentin
AU - Raïssi, Hamdi
N1 - Publisher Copyright:
© 2015, © 2015 American Statistical Association.
PY - 2015/1/2
Y1 - 2015/1/2
N2 - This article investigates the problem of testing instantaneous causality between vector autoregressive (VAR) variables with time-varying unconditional covariance. It is underlined that the standard test does not control the Type I errors, while the tests with White and heteroscedastic autocorrelation consistent (HAC) corrections can suffer from a severe loss of power when the covariance is not constant. Consequently, we propose a modified test based on a bootstrap procedure. We illustrate the relevance of the modified test through a simulation study. The tests considered in this article are also compared by investigating the instantaneous causality relations between U.S. macroeconomic variables.
AB - This article investigates the problem of testing instantaneous causality between vector autoregressive (VAR) variables with time-varying unconditional covariance. It is underlined that the standard test does not control the Type I errors, while the tests with White and heteroscedastic autocorrelation consistent (HAC) corrections can suffer from a severe loss of power when the covariance is not constant. Consequently, we propose a modified test based on a bootstrap procedure. We illustrate the relevance of the modified test through a simulation study. The tests considered in this article are also compared by investigating the instantaneous causality relations between U.S. macroeconomic variables.
KW - Unconditionally heteroscedastic errors
KW - VAR model
KW - Wild bootstrap
UR - http://www.scopus.com/inward/record.url?scp=84921922137&partnerID=8YFLogxK
U2 - 10.1080/07350015.2014.920614
DO - 10.1080/07350015.2014.920614
M3 - Article
AN - SCOPUS:84921922137
VL - 33
SP - 46
EP - 53
JO - Journal of Business and Economic Statistics
JF - Journal of Business and Economic Statistics
SN - 0735-0015
IS - 1
ER -