Improved tests for Granger noncausality in panel data. (March 2023)

• Record Type: Journal Article
• Authors: Xiao, Jiaqi; Karavias, Yiannis; Juodis, Artūras; Sarafidis, Vasilis; Ditzen, Jan
• Is Part Of: Stata journal. Volume 23:Number 1(2023)
• Page Start: 230
• Page End: 242
• Publication Date: 2023-03
• Subjects: st0706 -- xtgrangert -- xtgrangert postestimation -- panel data -- Granger causality -- Nickell bias -- heterogeneous panels -- half-panel jackknife -- cross-section dependence; Statistics -- Periodicals; Statistics -- Computer programs -- Periodicals; 001.422
• DOI: 10.1177/1536867X231162034
• Languages: English
• ISSNs: 1536-867X

Abstract

In this article, we introduce thextgrangert command, which implements the panel Granger noncausality testing approach developed by Juodis, Karavias, and Sarafidis (2021, Empirical Economics 60: 93–112). This test offers superior size and power performance to existing tests, which stem from the use of a pooled estimator that has a fasterN T convergence rate. The test has several other useful properties: it can be used in multivariate systems; it has power against both homogeneous and heterogeneous alternatives; and it allows for cross-section dependence and cross-section heteroskedasticity.