[R-SIG-Finance] Fwd: Re: Block Exogeneity Test
John Frain
frainj at tcd.ie
Fri Nov 21 22:55:39 CET 2014
This kind of econometrics gives econometricians a bad name. The
variables gdp, cpi and m3 are certainly not stationary. Modelling
should be in the logarithms of the variables and not in levels. If
there is no cointegration and the logs of the three variables are I(1)
VAR modelling should be in first differences of the logs.
The simplest way to test for block exogeneity would be (dlgdp is the
first difference of the log of GDP)
1. Estimate, by OLS, an AR(p) process for dlgdp and extract the loglikelihood
2. Estimate by OLS the dlgdp equation from the VAR(p) involving dlgdp
dlcpi dlm3 and extract the loglikelihood.
3. Use the loglikelihood ratio test to test the significance of the
extra variables in 2. This is a block exogeneity test of dlcpi and
dlm3 for dlgdp.
Working in this way ensures that one understands what they are doing
and adds to your understanding of the process..
If there is cointegration you will have to think a little more.
Lutkepohl, Helmut (2005), New Introduction to Multiple Time Series,
Springer is one of the many good references available on this topic
Best Regards
John
John C Frain, Ph.D.
Economics Department 3 Aranleigh Park
Trinity College Dublin Rathfarnham
College Green Dublin 14
Dublin 2 Ireland
Ireland
www.tcd.ie/Economics/staff/frainj/home.htm
mailto:frainj at tcd.ie
mailto:frainj at gmail.com
On 21 November 2014 11:03, Brian G. Peterson <brian at braverock.com> wrote:
> For the Wald-type test, see
>
> ###
>
> ?causality
>
> ###
>
> the vars package calls this 'instantaneous causality'.
>
> You will need to set the 'cause' parameter to a vector of your predictors.
> In your example:
>
> ###
>
> cause=c("gdp","cpi","m3")
>
> # note that R is case sensitive, and your
> # non-reproducible example mixed case
>
> ###
>
> You likely also want boot=TRUE and boot.runs set to some value appropriate
> to your data, in most formulations of the test procedure you're seeking.
>
> As you've described it, you're looking for bivariate tests, not truly a
> block exogeneity test, which tests whether the group of variables or 'block'
> are tested to see if the *block* causes any of the observed lags. It
> appears from the output that you request that you are looking for pairwise
> causality as individual variables are tested against the rest of the model.
>
> Regards,
>
> Brian
>
>
> On 11/21/2014 04:49 AM, Brian G. Peterson wrote:
>>
>> To the list. - Brian
>>
>>
>> -------- Forwarded Message --------
>> Subject: Re: [R-SIG-Finance] Block Exogeneity Test
>> Date: Fri, 21 Nov 2014 16:05:44 +0530
>> From: DEBASISH MAITRA <debasishmaitra at gmail.com>
>> To: Brian G. Peterson <brian at braverock.com>
>>
>>
>>
>> Hi Brian,
>>
>> Thanks for your mail.
>> I am specifically looking for Block Exogeneity Wald test after my VAR
>> model. For an example, I have three series gdp, cpi and m3. After
>> estimating the VAR model (with an assumption that these three variable
>> are stationary) among these three varables, if I really want to test
>> hypotheses ; lags of cpi explain current gdp, lags of cpi explain
>> current m3; lags of gdp explain current cpi, lags of gdp explain current
>> m3 etc. I should have the results look like;
>>
>> Dependent variable GDP
>> Excluded Chi-sq df prob
>> cpi
>> m3
>>
>> Dependent variable cpi
>> Excluded Chi-sq df prob
>> gdp
>> m3
>>
>> Dependent variable m3
>> Excluded Chi-sq df prob
>> gdp
>> cpi
>>
>> Kindly look into this and suggest the way ou.
>>
>>
>> Regards,
>> Debasish
>>
>> On Fri, Nov 21, 2014 at 3:23 PM, Brian G. Peterson <brian at braverock.com
>> <mailto:brian at braverock.com>> wrote:
>>
>> On 11/21/2014 03:31 AM, DEBASISH MAITRA wrote:
>>
>> I am Debasish Maitra. I am trying to run block exogeneity test
>> in R (vars
>> package) after a VAR model, but I am not able to find anything
>> out to do
>> this.
>>
>> It would be of great help if you kindly tell me how can I run
>> this.
>>
>>
>> It would be a great help if you followed the posting guide:
>>
>> http://www.r-project.org/__posting-guide.html
>> <http://www.r-project.org/posting-guide.html>
>>
>> and provided a reproducible example. Use a data set included with
>> the vars package, or some other data set included with a different R
>> package, and tell us in a reproducible way what you've already
>> tried, and where you're stuck.
>>
>> I don't believe that the 'vars' package includes a function for a
>> block exogeneity test on its model output.
>>
>> The MSBVAR package provides bivariate Granger causality tests in
>> lieu of a block exogeneity test.
>>
>> It would also help if you would be explicit about which form of
>> exogeneity test you are trying to apply, with a reference to the
>> paper you hope to use the technique from. I'm aware of at least two
>> different approaches, which each have different assumptions.
>>
>> Regards,
>>
>> Brian
>>
>> --
>> Brian G. Peterson
>> http://braverock.com/brian/
>> Ph: 773-459-4973 <tel:773-459-4973>
>> IM: bgpbraverock
>>
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>
>
>
> --
> Brian G. Peterson
> http://braverock.com/brian/
> Ph: 773-459-4973
> IM: bgpbraverock
>
>
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