granger causality test, Microeconomics

(Granger, 1969, 1988), where it can be addressed in terms of a VAR (vector auto regression) system. If an export platform is important for the country, FDI inflows should result in an increase in export flows from the host country. Therefore, Granger causality could be used to examine whether FDI Granger inflows cause export flows.

The direction of the Granger causality is sensitive to the number of lags; therefore, it is important to use the Akaike Information Criterion (AIC) (Akaike, 1974) to suggest the use of the lag with the lowest computed AIC value. The AIC is defined as: ln AIC = [ 2k/n] + ln [ RSS/n] where k is the number of regressors, n is the number of observations, and RSS is the residual sum of squares.

For FDI and exports and FDI and imports, the Granger causality test is applied based on a stationary dataset. Hence, it is necessary to establish the stationarity properties of the data, and unit root analysis is conducted for this purpose.  If an export platform is important for the country, the result will indicate an increase in export flows from the technology sector. Therefore, Granger causality could be used to examine whether FDI Granger inflows cause export flows or import substitution from the technology sector. The direction of the Granger causality is sensitive to the number of lags; therefore, it is important to use the Akaike Information Criterion (AIC) (Akaike, 1974) to suggest the use of the lag with the lowest computed AIC value. Given a data set, several competing models may be ranked according to their AIC, with the one having the lowest AIC being the best.

 

Posted Date: 2/26/2013 1:02:52 AM | Location : United States







Related Discussions:- granger causality test, Assignment Help, Ask Question on granger causality test, Get Answer, Expert's Help, granger causality test Discussions

Write discussion on granger causality test
Your posts are moderated
Related Questions
Q. What is Monetarism? Monetarism:Monetarism was a right-wing economic theory (associated with work of Milton Friedman, in particular) which believed that inflation could be co

Income and Substitution Effects: Normal Good *  The Special Case--The Giffen Good - The income effect may be large enough theoretically to cause the demand c


When does deadweight loss occur to society? Applying consumer and producer surplus the efficiency costs of a tax: A tax causes a deadweight loss to society, since less the g

marginal utility is applied on money or not

what is traditional economy 2 features of traditional economy

What is Rubenstein''s model in Game theory? A Rubinstein bargaining model is mainly refers to class of bargaining games which is main feature of alternating offers through an infi

Explain why goods provided by natural monopolies are often publicly owned. It would seem that most normal monopolies come with high MSB and also that society has deemed these g

The definition of a price maker is a "firm with some power to set the price because the demand curve for its output slopes downward", which in effect, means those firms with a down

1. Discuss how banks make money, and are structured in respect to Asset, Liability and Capital Management – give examples.