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
Lack of Integration in Policy Formulation and Policy Implementation: A common thread uniting these diverse diagnoses and prescriptions can be seen among most of the critical e

1. Assessment Criteria The coursework will be marked on the overall outcome including: structure, quality of reasoning, quality of written English, data analysis, referencing, sty

Chemical properties of p block elements

composite supply v/s joint supply

what is money? functions

??????? ??? ???? ??? # 100 ?????? #Minimum ?????? ?????

What is utility maximization according to consumer behavior? Consumer Behavior: Utility Maximization A foundational hypothesis onto individual behavior within modern econ

Shifts in Supply and Demand When supply and demand vary at the same time, the impact on the equilibrium price and quantity is known by: 1. The shape of the supply and dema

How to use Demand and Supply tools to analyze the case of the Egyptian labor market?

Explain the how the classical school views the role of markets and government intervention in fighting business cycles The classical school believes in the smooth functioning o