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Konstantinos N. Konstantakis and Panayotis G. Michaelides
''Step-by-Step Causality Revisited: Theory and Evidence''
( 2015, Vol. 35 No.2 )
The present paper introduces a VAR model with exogenous variables for testing one-sided (non-)causality by extending the works of Dufour and Renault (1998) and Dufour et al. (2006). In this context, it derives a test statistic for formally investigating one sided (non-)causality, while providing a simple algorithm for implementing the one sided (non-)causality test in a system framework and not equation-by-equation extending, thus, Dufour et al. (2006). We illustrate our approach by using a monthly dataset including dummy variables on Total Car Sales in the area of Athens over the period 2003-2012. According to our findings all variables cause the evolution of Total Sales cycles immediately and for almost eight (8) quarters when most of the causality effects die out completely. Clearly, future research on extending the methodology to a panel set-up would be of great interest.
Keywords: Causality testing, asymptotics, VAR, car sales, Greece.
JEL: C5 - Econometric Modeling: General
C1 - Econometric and Statistical Methods: General
Manuscript Received : Mar 03 2015 Manuscript Accepted : Apr 09 2015

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