Autoregressive modeling and causal ordering of economic variables☆

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Abstract

A multivariate generalization of the Wiener-Granger notion of causality is suggested. Propositions about population properties of various causal events are derived. These propositions may be used to interpret the statistical results as well as to check the empirical implications of various model variants and in ruling out a number of variants as being inconsistent with prior theories.

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    ☆

    This paper is a revised and condensed version of the paper entitled ‘Time Series Modelling and Causal Ordering of Canadian Money, Income, and Interest Rate’, which was presented in the Fourth International Time Series Meetings in Valencia, Spain, June 1981. This work was completed while the author was visiting Bell Laboratories, Murray Hill, NJ. Research is supported in part by National Science Foundation Grant SES80-07576 at the Institute for Mathematical Studies in the Social Sciences, Stanford University, and by Social Sciences and Humanities Research Council of Canada Grant 410-80-0080 at the Institute for Policy Analysis, University of Toronto. I am indebted to C.W. Keng and K.Y. Tsui for computational assistance. I also wish to thank the referees and T. Amemiya, T.W. Anderson, V. Bencivenga, J.D. Bossons, J. Carr and G. Chow for helpful comments.

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    Copyright © 1982 Published by Elsevier B.V.