1997 Fiscal Year Final Research Report Summary
Cointegration analysis of the vector moving average process
| Project/Area Number |
07630023
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| Research Category |
Grant-in-Aid for Scientific Research (C)
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| Allocation Type | Single-year Grants |
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| Section | 一般 |
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| Research Field |
Economic statistics
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| Research Institution | KYOTO UNIVERSITY |
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Principal Investigator |
MORIMUNE Kimio KYOTO UNIVERSITY Instite of Economic Research, Professor, 経済研究所, 教授 (20109078)
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| Project Period (FY) |
1995 – 1997
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| Keywords | Cointegration / Unit root / Macro economics / Causality / Structural change |
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| Research Abstract |
The unit root test for the vector moving average process is studied in this research. We apply the non-stationary test of the Granger causality between the Japanese money supply and GNP in this paper. The unit root techniques and the co-integration analysis have grown rapidly in econometrics in the last ten years, and the non-stationary test for Granger causality is developed. We shed new lights on the money income causality using the non-stationary techniques.
We firstly specify the uni-variate ARMA models of the money, income, GNP deflator, and the rate of interest using the Dickey and Fuller (DF) or the augmented DF (ADF) tests. Two diagnostic tests are applied to each selected ARMA regression. One is the residual DF test, and the other is the MA unit root test of residuals. After the ARMA model selection, the VAR regression is estimated with co-integrated relation using Johansen's maximum likelihood method. In this estimation, the lag length of each variable is taken to be different from each other which are kept the same in Johansen. The two causality tests are applied to the VAR one of which is the maximum likelihood and the other is the OLS method. It is found out that the income is causing money but not the opposite. Further analyzes of the causality are performed using various lag lengths in VAR but keeping the same lag length for all variables. The income to money causality is found again.
The causality is examined for the shorter sample periods which are used by Oritani (1979) . There, the money is found to be non-stationary but the income is stationary. The Granger test is modified to the VAR which includes both stationary and non-stationary variables. The Granger test resulted in the income to money causality, not in the money to income causality. Comments follow on the filter used by Sims (1972) .
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