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Econometrics of Structural Change pp 75–86Cite as

The Stability Assumption in Tests of Causality Between Money and Income

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Part of the book series: Studies in Empirical Economics ((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.

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Author information

Authors and Affiliations

  1. Institut für Statistik und Ökonometrie, Christian-Albrechts-Universität Kiel, Olshausenstr. 40-60, 2300, Kiel 1, West Germany

    Helmut Lütkepohl

Authors
  1. Helmut Lütkepohl
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Editor information

Editors and Affiliations

  1. Department of Statistics, University of Dortmund, Vogelpothsweg, 4600, Dortmund 50, Germany

    Walter Krämer

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© 1989 Physica-Verlag Heidelberg

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Lütkepohl, H. (1989). The Stability Assumption in Tests of Causality Between Money and Income. In: Krämer, W. (eds) Econometrics of Structural Change. Studies in Empirical Economics. Physica-Verlag HD. https://doi.org/10.1007/978-3-642-48412-4_7

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  • DOI: https://doi.org/10.1007/978-3-642-48412-4_7

  • Publisher Name: Physica-Verlag HD

  • Print ISBN: 978-3-642-48414-8

  • Online ISBN: 978-3-642-48412-4

  • eBook Packages: Springer Book Archive

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