Lag selection and cointegration test in VAR with two variables

By Divya Dhuria and Priya Chetty on September 27, 2018 3 Comments

The previous article showed that the three-time series values Gross Domestic Product (GDP), Gross Fixed Capital Formation (GFC) and Private Final Consumption (PFC) are non-stationary. Therefore they may have long-term causality. The general assumption, in this case, is that consumption PFC affects GDP, therefore these variables might be cointegrated.

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Importance of Granger causality test

By Divya Dhuria, Priya Chetty and Saptarshi Basu Roy Choudhury on September 18, 2018 1 Comment

Granger causality is a method to examine the causality between two variables in a time series. “Causality” is related to cause and effect notion, although it is not exactly the same. It is a statistical concept which is based on the prediction.