Nonlinear Granger Causality: Guidelines for Multivariate Analysis

Diks, Cees; Wolski, Marcin

doi:10.1002/jae.2495

Cited by 61 publications

(31 citation statements)

References 28 publications

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“…Their findings further revealed that physical capital and energy are two significant contributors to the economic growth in Asian Pacific countries. Similarly, Fang and Wolski () examined the causal relationship between energy consumption, human capital and economic growth in China during the period of 1965–2014 using the recently developed nonlinear multivariate Granger causality test by Diks and Wolski (). Their findings revealed that there is no causal relationship between aggregate energy use and coal, natural gas and hydroelectricity consumption, while unidirectional causality running from GDP to oil is found using the nonlinear approach.…”

Section: Literature Reviewmentioning

confidence: 99%

Energy consumption, human capital investment and economic growth in South Africa: a vector error correction model analysis

Ilesanmi

Tewari

2017

OPEC Energy Review

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This paper investigates the dynamic causal relationship between energy consumption, human capital investment and economic growth in South Africa for the period 1960–2015 within the vector error correction model (VECM) framework. It was revealed that there is cointegration among the variables. The causality test result reveals that there exists a long‐run bi‐directional relationship between economic growth and energy consumption. While on the other hand, a long‐run unidirectional causal relationship was discovered running from economic growth and energy consumption to social and economic infrastructure investment. This justifies the government's massive investment in the energy sector which is aimed at meeting the increasing energy demand. However, the lack of feedback from social infrastructural investment may imply that the focus social infrastructure investment is not adequate to granger cause growth or due to high inequality and unemployment in the country which will require more investment attention for it to significantly affect growth. The government, therefore, should give priority to the provision of both social and economic infrastructure investment and implementation of policies that are aimed at human capital development through public empowerment so that they can support the economy instead of depending on the government.

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Section: Literature Reviewmentioning

confidence: 99%

Energy consumption, human capital investment and economic growth in South Africa: a vector error correction model analysis

Ilesanmi

Tewari

2017

OPEC Energy Review

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“…Then, we test whether there exists cointegration among them. Finally, we apply linear and non-linear causality tests using the recently developed method by [27] (hereafter DW test).…”

Section: Econometrics Methodologymentioning

confidence: 99%

“…Our final step is to check for the presence of nonlinear causal relationships between the variables. For this purpose, we employ the test of [27], which is a nonparametric test. The no parametrization implies testing non-Granger-causality against an unspecified alternative.…”

Section: Nonlinear Causality Testsmentioning

confidence: 99%

“…Our paper contributes to the literature in two ways. First, to the best of our knowledge, this is the first paper that applies the nonlinear causality test of [27] to estimate Keynesian models. Second, even though our paper is closely related to the extensive literature inspired by the [28] model, to the best of our knowledge, this is the first paper that analyzes a cointegrating relationship between domestic consumption and domestic investment.…”

Section: Introduction: Underinvestment and Underconsumption In The Gementioning

confidence: 99%

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Investment Sustained by Consumption: A Linear and Nonlinear Time Series Analysis

Pérez-Montiel¹,

Erbina²

2019

Sustainability

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This paper studies the dynamic relationship between consumption and investment in the United States between 1947 and 2018. Our findings support the postulates of Keynesian economics-while they are contrary to the theoretic background on which the numerous empirical studies on the saving-investment nexus are based. We find a long-run nexus between consumption and investment, and positive linear Granger-causality running unidirectionally from consumption to investment. Therefore, investment is sustained by consumption. Further, we find that the variables have nonlinear structures and, thus, we apply nonlinear causality tests. We provide evidence of nonlinear causality running unidirectionally from consumption to investment. Nevertheless, after controlling for Government Expenditure, this nonlinear causal relationship disappears, indicating that Government Expenditure drives the nonlinear causal relationship between private consumption and investment. We argue that this finding is consistent with the notion that investment decisions are guided by permanent aggregate demand, because public expenditure allows private consumption to have a sufficiently permanent trajectory to be considered as a guide for investment decisions. Our results do not support the austerity and deflation measures implemented in the last years (especially in the European Union). On the other hand, our findings call for the incentive of final public expenditure, since it favours the long-run link between the private decisions to consume and invest.

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“…Generally speaking, all of the aforementioned tests are designed for investigating the linear dependence (i.e., the cross-correlation in the mean, variance or higher moments) between two model residuals, and hence they could exhibit a lack of power in detecting the non-linear dependence structure. A significant body of research so far has documented the non-linear dependence relationship among a myriad of economic fundamentals; see, e.g., Hiemstra and Jones (1994), Wang Diks and Wolski (2016) to name a few. However, less attempts have been made in the literature to account for both linear and nonlinear dependence structure, which shall be two parallel important characteristics to be tested.…”

mentioning

confidence: 99%

New HSIC-based tests for independence between two stationary multivariate time series

Wang¹,

Li²,

Zhu

2021

STAT SINICA

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This paper proposes some novel one-sided omnibus tests for independence between two multivariate stationary time series. These new tests apply the Hilbert-Schmidt independence criterion (HSIC) to test the independence between the innovations of both time series.Under regular conditions, the limiting null distributions of our HSICbased tests are established. Next, our HSIC-based tests are shown to be consistent. Moreover, a residual bootstrap method is used to obtain the critical values for our HSIC-based tests, and its validity is justified. Compared with the existing cross-correlation-based tests for linear dependence, our tests examine the general (including both linear and non-linear) dependence to give investigators more complete information on the causal relationship between two multivariate time series. The merits of our tests are illustrated by some simulation results and a real example.

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Nonlinear Granger Causality: Guidelines for Multivariate Analysis

Cited by 61 publications

References 28 publications

Energy consumption, human capital investment and economic growth in South Africa: a vector error correction model analysis

Energy consumption, human capital investment and economic growth in South Africa: a vector error correction model analysis

Investment Sustained by Consumption: A Linear and Nonlinear Time Series Analysis

New HSIC-based tests for independence between two stationary multivariate time series

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