Granger Causality and the Sampling of Economic Processes

J.R. McCrorie, M.J. Chambers

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    Abstract

    This paper provides a discussion of the developments in econometric modelling that are designed to deal with the problem of spurious Granger causality relationships that can arise from temporal aggregation.We outline the distortional e ects of using discrete time models that explicitly depend on the unit of time and outline a remedy of constructing timeinvariant discrete time models via a structural continuous time model.In an application to testing for money-income causality, we demonstrate the importance of incorporating exact temporal aggregation restrictions on the discrete time data.We do this by conducting causality tests in discrete time models that: (a) impose the temporal aggregation restrictions exactly; (b) impose the temporal aggregation restrictions approximately; and (c) do not impose these restrictions at all.
    Original languageEnglish
    Place of PublicationTilburg
    PublisherVakgroep CentER
    Number of pages31
    Volume2004-39
    Publication statusPublished - 2004

    Publication series

    NameCentER Discussion Paper
    Volume2004-39

    Keywords

    • sampling
    • aggregation
    • models

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