Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 343: A general framework for testing the Granger noncausality hypothesis

Anne Péguin-Feissolle () and Timo Teräsvirta ()
Additional contact information
Anne Péguin-Feissolle: GREQAM-CNRS, Postal: Centre de la Charite, 2, rue de la Charite, F-13002 Marseille, France
Timo Teräsvirta: Dept. of Economic Statistics, Stockholm School of Economics, Postal: P.O. Box 6501, SE-113 83 Stockholm, Sweden

Abstract: In this paper, new noncausality tests relying on a general nonlinear framework are proposed and their performance studied by a Monte Carlo experiment and a variety of nonlinear artificial series. Two of the tests are based on a Taylor expansion of the nonlinear model around a given point in the sample space. Yet another test is based on artificial neural networks. The tests appear to be well-sized and have good power properties.

Keywords: Hypothesis testing; causality; artificial neural networks; nonlinearity

JEL-codes: C12; C22; C51

22 pages, November 9, 1999

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