Nonlinearity and Endogeneity in Macro-Asset Pricing

Hiemstra, Craig; Kramer, Charles

doi:10.2202/1558-3708.1030

Cited by 17 publications

(9 citation statements)

References 29 publications

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“…Unlike the linear Granger causality test, there is no literature on the appropriate way to specify optimal values for lag lengths and the bandwidth. On the basis of Monte Carlo results in Hiemstra and Kramer (1997) [19] , for all cases, the lead length is set at m = 1, and Lx is set to equal to Ly, using common lag lengths of 1 to 6 lags.…”

Section: Data and Experiments Settingmentioning

confidence: 99%

Did speculative activities contribute to high crude oil prices during 1993 to 2008?

2009

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By applying two nonlinear Granger causality testing methods and rolling window strategy to explore the relationship between speculative activities and crude oil prices, the unidirectional Granger causality from speculative activities to returns of crude oil prices during the high price phase is discovered. It is proved that speculative activities did contribute to high crude oil prices after the Asian financial crisis and OPEC's output cut in 1998. The unidirectional Granger causality from returns of crude oil prices to speculative activities is significant in general. But after 2000, with the sharp rise in crude oil prices, this unidirectional Granger causality became a complex nonlinear relationship, which cannot be detected by any linear Granger causality test.

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Section: Data and Experiments Settingmentioning

confidence: 99%

Did speculative activities contribute to high crude oil prices during 1993 to 2008?

2009

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“…Because of linearity assumptions in traditional Granger causality test, this model would not reveal certain nonlinear causations among variables. As Baek and Brock (1992), Bell et al (1996), Chen et al (2004), Hiemstra and Jones (1994), Hiemstra and Kramer (1997), Li (2006) and Skalin and Teräsvirta (1999) recommend, further nonlinear causality tests may reveal more detailed information about the nature of causation among the macroeconomic variables. In the following section, we consider nonlinear causality between our variables using two different models.…”

Section: Traditional Linear Causality Testmentioning

confidence: 96%

“…Furthermore, a significant part of the literature allows for nonlinear causal relationships between the macroeconomic variables (e.g. Baek and Brock, 1992;Bell et al, 1996;Chen et al, 2004;Hiemstra and Jones, 1994;Hiemstra and Kramer, 1997;Li, 2006;Skalin and Teräsvirta, 1999).…”

Section: Introductionmentioning

confidence: 99%

A comparative analysis of monetary responses to global oil price changes: net oil producing vs. net oil consuming countries

Sotoudeh

Worthington

2015

Int Econ Econ Policy

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In this paper, we examine monetary responses to global oil price changes across a panel of seven major net oil consuming countries and three major net oil producing countries using monthly data from January 1986 to August 2013. Employing a variety of linear and nonlinear causality tests, our main findings are as follows. First, oil price movements directly affect monetary aggregates in both net oil consuming and net oil producing countries. Second, nonlinear causality tests reveal strong causal influences from oil prices to monetary aggregates. Third, nonlinear parametric and nonparametric models reveal oil price changes account for significant changes in monetary aggregates in Denmark, Germany, the Netherlands, and the US among net oil consuming countries and in Canada and Mexico among net oil producing countries. Finally, monetary aggregates in these countries respond nonlinearly only to oil price increases.

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“…However, for theses sub-samples, as is demonstrated in the first panel of Figures 6 and 7, we found a significant non-linear causal relationship from FFR to 10YGBR. Therefore, by combining these two results, we can say that 12 Hiemstra and Kramer (1997). 13 We have used Panchenkos C11 computer codes to conduct non-linear Granger causality tests.…”

Section: Combined Linear and Non-linear Granger Causalitymentioning

confidence: 99%

Linear and Non‐Linear Granger Causality Between Short‐Term and Long‐Term Interest Rates: A Rolling Window Strategy

2016

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In this article, a rolling window strategy is used to detect the linear and non‐linear Granger causality relationships between the U.S. federal funds rate and the 10‐year government bond rate, during different time horizons, investigating whether these causalities change with the passing of time. For linear Granger causality tests, we apply the Toda and Yamamoto () approach and for non‐linear ones we use a non‐linear Granger causality test introduced by Diks and Panchenko (). Our findings show that during nearly all time periods there is a significant two‐way Granger causality relationship between these two interest rates.

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Nonlinearity and Endogeneity in Macro-Asset Pricing

Cited by 17 publications

References 29 publications

Did speculative activities contribute to high crude oil prices during 1993 to 2008?

Did speculative activities contribute to high crude oil prices during 1993 to 2008?

A comparative analysis of monetary responses to global oil price changes: net oil producing vs. net oil consuming countries

Linear and Non‐Linear Granger Causality Between Short‐Term and Long‐Term Interest Rates: A Rolling Window Strategy

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