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The Economic Research Institute, Stockholm School of Economics SSE/EFI Working Paper Series in Economics and Finance

No 672:
Testing the Granger noncausality hypothesis in stationary nonlinear models of unknown functional form

Anne Péguin-Feissolle (), Birgit Strikholm () and Timo Teräsvirta ()

Abstract: In this paper we propose a general method for testing the Granger noncausality hypothesis in stationary nonlinear models of unknown functional form. These tests are based on a Taylor expansion of the nonlinear model around a given point in a sample space. We study the performance of our tests by a Monte Carlo experiment and compare these to the most widely used linear test. Our tests appear to be well-sized and have reasonably good power properties.

Keywords: Hypothesis testing; causality; (follow links to similar papers)

JEL-Codes: C22; C51; (follow links to similar papers)

30 pages, August 27, 2007, Revised January 18, 2012

This is a revised version (January 2012) of the paper.

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This paper is published as:
Péguin-Feissolle, Anne, Birgit Strikholm and Timo Teräsvirta, (2013), 'Testing the Granger noncausality hypothesis in stationary nonlinear models of unknown functional form', Communications in Statistics - Simulation and Computation, Vol. 42, pages 1063-1087



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