[R] Granger casuality test in r

[John C Frain]

On Fri, 30 Nov 2018 at 14:40, Eneida Permeti via R-help <
r-help using r-project.org> wrote:

>
> The results of my Granger causality test in r are below. VARp is my VAR
> model and I have two endogenous variables. From the results, I have only
> instantaneous causality. What does it mean?Thank you so much
> > causality(VARp,cause="The.economic.growth")
> $Granger
>
>     Granger causality H0: The.economic.growth do not Granger-cause
>     The.differenced.public.debt
>
> data:  VAR object VARp
> F-Test = 0.4038, df1 = 6, df2 = 8, p-value = 0.8573
>
>
> $Instant
>
>     H0: No instantaneous causality between: The.economic.growth and
>     The.differenced.public.debt
>
> data:  VAR object VARp
> Chi-squared = 6.0964, df = 1, p-value = 0.01355
>
>
> > causality(VARp,cause="The.differenced.public.debt")
> $Granger
>
>     Granger causality H0: The.differenced.public.debt do not Granger-cause
>     The.economic.growth
>
> data:  VAR object VARp
> F-Test = 0.70214, df1 = 6, df2 = 8, p-value = 0.6572
>
>
> $Instant
>
>     H0: No instantaneous causality between: The.differenced.public.debt and
>     The.economic.growth
>
> data:  VAR object VARp
> Chi-squared = 6.0964, df = 1, p-value = 0.01355
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>
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It appears that you have not found Granger causality.  I would not be
surprised at this result.

You growth rate is almost equivalent to the log difference of GPD at
constant prices. (real GDP). I suspect that your
 The.differenced.public.debt is at current prices and is not log
transformed.

Granger Causality requires you to control for other variables.  For example
other variables may be causing both of your variables. If such is the case
your finding of Granger Causality may be spurious.

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