Luca Margaritella
Associate senior lecturer
Granger Causality Testing in High-Dimensional VARs: A Post-Double-Selection Procedure
Author
Summary, in English
We develop an LM test for Granger causality in high-dimensional (HD) vector autoregressive (VAR) models based on penalized least squares estimations. To obtain a test retaining the appropriate size after the variable selection done by the lasso, we propose a post-double-selection procedure to partial out effects of nuisance variables and establish its uniform asymptotic validity. We conduct an extensive set of Monte-Carlo simulations that show our tests perform well under different data generating processes, even without sparsity. We apply our testing procedure to find networks of volatility spillovers and we find evidence that causal relationships become clearer in HD compared to standard low-dimensional VARs.
Department/s
- Department of Economics
Publishing year
2023
Language
English
Pages
915-958
Publication/Series
Journal of Financial Econometrics
Volume
21
Issue
3
Document type
Journal article
Publisher
Oxford University Press
Topic
- Economics
Keywords
- Granger causality
- high-dimensional inference
- post-double-selection
- vector autoregressive models
- C55
- C12
- C32
Status
Published
ISBN/ISSN/Other
- ISSN: 1479-8417