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From |
"Gustavo Sanchez" <gsanchez@stata.com> |

To |
<statalist@hsphsun2.harvard.edu> |

Subject |
st: RE: help on granger causality |

Subject |
help on granger causality |

Date |
Tue, 28 Jun 2005 11:58:12 -0500 |

Rashmi <rashmi@brandeis.edu> wants to know how to interpret the -vargranger- output. Specifically, Rashmi would like to interpret >. vargranger > Granger causality Wald tests > +------------------------------------------------------------------+ > | Equation Excluded | chi2 df Prob > chi2 | > |--------------------------------------+---------------------------| > | bp_level lnpetrol | 14.108 4 0.007 | > | bp_level lndomcred | 6.0917 4 0.192 | > | bp_level ALL | 19.279 8 0.013 | > |--------------------------------------+---------------------------| > | lnpetrol bp_level | 5.9199 4 0.205 | > | lnpetrol lndomcred | 5.4121 4 0.248 | > | lnpetrol ALL | 10.121 8 0.257 | > |--------------------------------------+---------------------------| > | lndomcred bp_level | 49.78 4 0.000 | > | lndomcred lnpetrol | 7.3881 4 0.117 | > | lndomcred ALL | 57.215 8 0.000 | > +------------------------------------------------------------------+ Variable A is said to Granger cause variable B, if the lags of A can improve a forecast for variable B. In a VAR model, under the null hypothesis that variable A does not Granger cause variable B, all the coefficients on the lags of variable A will be zero in the equation for variable B. A Wald test is commonly used to test for Granger causality. Each row of the above table reports a Wald test that the coefficients on the lags of the variable in the "excluded" column are zero in the equation for the variable in the "equation" column. For example, the small p-value in the first row is evidence that the coefficients on the lags of lnpetrol are not jointly zero in the equation for bp_level, indicating that the evidence favors the alternative that lnpetrol Granger causes bp_level. As another example, the second row corresponds to the Wald test that the coefficients on the lags of lndomcred in the equation for bp_level are jointly zero. In this case we cannot reject the null hypothesis that lndomcred does not Granger cause bp_level. --David --Gustavo ddrukker@stata.com gsanchez@stata.com * * For searches and help try: * http://www.stata.com/support/faqs/res/findit.html * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/

**Follow-Ups**:**Re: st: RE: help on granger causality***From:*Rashmi Shankar <rashmi@brandeis.edu>

**References**:**st: help on granger causality***From:*Rashmi Shankar <rashmi@brandeis.edu>

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