granger causality test, Microeconomics

Assignment Help:

(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.

 


Related Discussions:- granger causality test

Supply decisions, \-6 6\ Why\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\...

\-6 6\ Why\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\

Supply, composite supply v/s joint supply

composite supply v/s joint supply

Determine the solution of the homogeneous system, The reduced row echelon f...

The reduced row echelon form of  A=    is equal to R = (a)  What can you say about row 3 of A? Give an example of a possible third row for A. (b)  Determine the values o

Econometric, I need help with tutoring session for an economic coursework

I need help with tutoring session for an economic coursework

Production function, A competitive firm produces output using three fixed f...

A competitive firm produces output using three fixed factors and one variable factor. The firm’s short-run production function is q = 154x – 5x2, where x is the amount of variable

Find the monopsony first mover competitive fringe buyer, Draw the suitable ...

Draw the suitable graph for each situation and describe a real world situation in health care in which the market structure utilized in the question may exist. Demand: P=6,000-0

Examine recent developments in demand theory, Critically examine recent dev...

Critically examine recent developments in demand theoryon #Minimum 100 words accepted#

Steam question, Processors of aseptically packaged juice-based beverages mu...

Processors of aseptically packaged juice-based beverages must adequately heat their product before packaging it in order to be sure that they have “killed” the microorganisms which

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd