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

Change in the rate of population growth, Should the manufacture, supply and...

Should the manufacture, supply and use of tobacco be criminalised? Provide arguments for and/or against (relates to defining crime; concepts of deviance etc) Examine t

Define disposable incomeand dumping, Define Disposable Incomeand dumping ...

Define Disposable Incomeand dumping Disposable Income :  The amount of income left after as deductions as income tax, pension contributions and national insurance. More genera

Mangerial Economics, A portion of the demand schedule for wax candles (per ...

A portion of the demand schedule for wax candles (per case) is shown below. Px $50 $30 $10 Qx 500 600 700 What is the demand curve (straight line) that corresponds to the schedu

Explicit costs, Joe is the owner-operator of Joe’s Haircuts Unlimited. Las...

Joe is the owner-operator of Joe’s Haircuts Unlimited. Last year he earned $100,000 in total revenues and paid $65,000 to his employees and suppliers. During the course

Microeconomics, When the price of candy bars increased from $.45 to $.55 th...

When the price of candy bars increased from $.45 to $.55 the quantity demanded changed from 21,000 per day to 19,000 per day. In this range the price elasticity of demand for cand

Excess capacity, the prevalence of excess capacity is the direct consequenc...

the prevalence of excess capacity is the direct consequence of the existence of monopolistic competition

Law of demand, The price of petrol fell during the past year. a. Explain...

The price of petrol fell during the past year. a. Explain why the law of demand applies to petrol just as it does to all other goods and services. b. Explain how the substitu

Utility and constrained optimization , Suppose the price of books is $15, t...

Suppose the price of books is $15, the price of movies is $5, and your income is $75. Assuming you have a desire to reach constrained optimization, how many movies will you buy? Ho

Indifference curve analysis, You are a commuter student at a local universi...

You are a commuter student at a local university. Because of the steep rise in gasoline prices, your parents decide to give you enough additional weekly cash so that you can affor

#syndicated oligopoly, Could I have examples of syndicated and organized ol...

Could I have examples of syndicated and organized oligopolies with companies as examples

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