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The Stability Assumption in Tests of Causality Between Money and Income

  • Helmut Lütkepohl
Part of the Studies in Empirical Economics book series (STUDEMP)

Abstract

This note argues that structural stability is an important condition for tests of Grangercausality. Despite this fact the standard causality tests are sometimes applied to data for which structural stability cannot be assumed a priori. Therefore the stability of GNP/M1 systems of the U.S., Canada, and West Germany in the aftermath of the 1973/74 oil crisis is analyzed using formal statistical tests. Prediction tests are particularly useful for that purpose. The stability of the model for Canadian data is rejected whereas stability is not rejected for the U.S. and West Germany.

Keywords

Forecast Error Prediction Test Structural Instability Estimation Period Stationarity Test 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Physica-Verlag Heidelberg 1989

Authors and Affiliations

  • Helmut Lütkepohl
    • 1
  1. 1.Institut für Statistik und ÖkonometrieChristian-Albrechts-Universität KielKiel 1West Germany

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