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

Consumer surplus, Two consumers John and grayson like to transfer songs to ...

Two consumers John and grayson like to transfer songs to their phones from jose phone the table represents their willingness to pay and jose willingness to accept for each download

What do you meant by the term economic efficiency, Problem: i) What do ...

Problem: i) What do you meant by the term ‘economic efficiency'? ii) By using appropriate examples differentiate between fixed and variable costs. iii) Consider different

Demand functions for one product facing two markets, Suppose a firm faces t...

Suppose a firm faces two markets for the same product. In market A, the demand function is PA=60-QA, while in market B the demand function is PB=36-0.5QB. The total cost function i

Production vs cost - resource flow, With current technology, suppose a firm...

With current technology, suppose a firm is producing 400 loaves of bread daily. Assume that the least cost combination of resources in producing those loaves is $180 ( 5 units of

How the classical school views the role of markets, Explain the how the cla...

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

Economics, What are the factors that producers in the society may take into...

What are the factors that producers in the society may take into consideration when deciding on the what to produce,how to produce and for whom ?

Marginal utility theory, discuss whether marginal utility is a realistic pi...

discuss whether marginal utility is a realistic piece of economy analysis in a consumer demand

Supply, causes of abnormal supply curve

causes of abnormal supply curve

Is 101 module 4, As you know, Northern Nevada Green Coalition is interested...

As you know, Northern Nevada Green Coalition is interested in showing how green energy production can help to grow and diversify Nevada's economy. In order to do that, we need to a

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