Testing for Granger Non causality in Heterogeneous Panels

Niveau: Supérieur, Master
Testing for Granger Non-causality in Heterogeneous Panels Elena-Ivona Dumitrescu? Christophe Hurlin† ‡ December 2011 Abstract This paper proposes a very simple test of Granger (1969) non-causality for hetero- geneous panel data models. Our test statistic is based on the individual Wald statistics of Granger non causality averaged across the cross-section units. First, this statistic is shown to converge sequentially to a standard normal distribution. Second, the semi- asymptotic distribution of the average statistic is characterized for a fixed T sample. A standardized statistic based on an approximation of the moments of Wald statistics is hence proposed. Third, Monte Carlo experiments show that our standardized panel statistics have very good small sample properties, even in the presence of cross-sectional dependence. • Keywords : Granger non-causality, Panel data, Wald Test. • J.E.L Classification : C23 ?LEO, University of Orleans and Maastricht University. email: . †LEO, University of Orleans. email: . A substantial part of the work for this paper was undertaken in the Department of Economics of the University Paris IX Dauphine, EURIsCO. ‡I am grateful for the comments received from the participants of the econometric seminars at University Paris I, Paris X Nanterre, Orleans, Aix-Marseille, Marne-la-Vallee, Maastricht University and University of Geneva, EC 2.

• panel


• individual residuals


• causality


• cross-section units


• standard individual


• wald statistic


• causal relationship


• heterogeneous processes