Vector Autoregressions and Causality

Toda, Hiro Y.; Phillips, Peter C.B.

doi:10.2307/2951647

Cited by 744 publications

(386 citation statements)

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“…Before proceeding for the Cointegration test, the econometric methodology says all the suggested variables in the model must be integrated in order I(1). Fowowe (2011) described that after testing the unit root there are two ways of testing the causality (i) the first condition is that when the variables are integrated in order I(1) and Cointegrated then the VECM is the best choice to be used, see also (Emirmahmutoglu & Kose, 2011;Fowowe, 2011;Moudatsou & Kyrkilis, 2011;Zhang, 2001) the (ii) way is that if the proposed variables are not integrated in the same order then the causality should be proceed by the VAR approach, see also (Fowowe, 2011;Toda & Phillips, 1993). But before going to the empirical analysis of a detailed summary of the proposed variables in Table 1.…”

Section: Data and Estimation Strategymentioning

confidence: 99%

Does Foreign Direct Investment Lead to Economic Growth? Evidences from Asian Developing Countries

Ali¹,

Mingque²

2018

IJEF

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The study about the interrelationship between FDI and economic growth in the host country is one of the hottest discussions. Some of the studies have evidence and consider FDI as the growth driver and some others don't. This study attempted to scrutinize the causal association of FDI with GDP in Indonesia, India, Malaysia and Bangladesh for the years of 1990 to 2014. Cointegration test has been applied in this study which shows that there is a long-term interrelationship within FDI and economic growth and then applied the Granger causality (GC) test which is based on the VECM. The short run results show that there are no evidence of causality direction from FDI to GDP and vice versa, whereas the long run results show that there is a positive impact of FDI and other variables to the GDP but not significant, and from GDP and other variables to FDI there is a negative interrelationship but significant. The results show the ambiguous interrelationship between FDI and economic growth.

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Section: Data and Estimation Strategymentioning

confidence: 99%

Does Foreign Direct Investment Lead to Economic Growth? Evidences from Asian Developing Countries

Ali¹,

Mingque²

2018

IJEF

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“…By utilising a VAR model it is possible to analyse the long term co-integrating relationship between the variables (Doyle 2001). A test for Granger causality is applied to the VAR model estimated as outlined by Tonda and Phillips (1993), Tonda and Yamamoto (1995) and Zapata and Rambaldi (1997).…”

Section: Estimating the Vector Autoregressive (Var) Model And Testingmentioning

confidence: 99%

An analysis of the interdependence of demographic factors, labour effort and economic growth in Ireland

Doran

2012

International Journal of Social Economics

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Original citationAn analysis of the interdependence of demographic factors, labour effort and economic growth in Ireland", International Journal of Social Economics, Vol. An Analysis of the Interdependence of Demographic Factors, Labour Effort and Economic Growth in IrelandAbstract Purpose -The purpose of this article is to analyse the effects of a declining birth rate and an increasing old age-population ratio on Ireland's economic output. Design-Methodology/Approach -This paper utilises data on the birth rate, old-age population ratio, economic output and labour effort of the Irish economy to estimate a vector-autoregressive model. The results of this model are then analysed to test for the presence of Granger causality among these variables. In doing so it is possible to assess whether there are statistically significant causal relationships existing among these factors. Subsequently, impulse response functions are derived from this model in order to assess the magnitude of the causal relationships. Findings -The results suggest that declining fertility rates and increases in the old-age dependency ratio have a significant impact on labour effort and economic output. Labour effort is also found to explain variation in the fertility rate and economic output. Economic output is found to effect labour effort and the fertility rate. Social Implications -The results derived in this paper raise interesting policy implications. It is evident that Ireland's declining birth rate and increasing old-age population ratio are creating a demographic situation which will have implications for future economic growth. Policies need to be put in place to mitigate the negative effects these factors will have on Irish growth. Originality/Value -This paper adopts modern econometric techniques to assess the causal relationships which exist between the demographic and economic factors considered. These have not previously been applied to the Irish situation. In doing this, this paper provides an important insight into the changing dynamics of the Irish economy.

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“…Model (2.2) with lag length k = 2 and cointegration rank r = 3 was estimated in CV. In the present context, leading indicator properties of broad money M3 can be investigated by conducting tests that money does not Granger-cause prices, following the results in Toda and Phillips (1993, 1994a, 1994b Toda and Phillips (1993,1994a, 1994b where the different hypotheses are defined as follows (see Toda and Phillips (1993) Therefore, on the basis of the Toda and Phillips tests conducted above, the null hypothesis that M3 money does not Granger-cause GDP prices within the information set at hand cannot be rejected at standard confidence levels. This inference appears to be robust to the chosen sample period.…”

Section: Investigating the Leading Indicator Properties Of M3 In mentioning

confidence: 99%