Thursday, July 26, 2012

Beware of Tests for Nonlinear Granger Causality

Standard tests for Granger causality (or, more correctly, Granger non-causality) are conducted under the assumption that we live in a linear world.

I've discussed some of the issues associated with applying such tests in the presence of possibly integrated/cointegrated time-series data previously, here and here.

But can we justify limiting our attention to a linear environment?


It's been a quiet week at the lake - specifically, no internet access! And hence no posts.

I haven't been able to respond to comments and requests either, so please accept my apology for that.
Yes, I know I should be better organized!