Publication Type

Working Paper

Version

publishedVersion

Publication Date

2-2016

Abstract

Granger non-causality in distribution is fundamentally a probabilistic conditional independence notion that can be applied not only to time series data but also to cross-section and panel data. In this paper, we provide a natural definition of structural causality in cross-section and panel data and forge a direct link between Granger (G-) causality and structural causality under a key conditional exogeneity assumption. To put it simply, when structural effects are well defined and identifiable, G- non-causality follows from structural non-causality, and with suitable conditions (e.g., separability or monotonicity), structural causality also implies G-causality. This justifies using tests of G- non-causality to test for structural non-causality under the key conditional exogeneity assumption for both cross-section and panel data. We pay special attention to heterogeneous populations, allowing both structural heterogeneity and distributional heterogeneity. Most of our results are obtained for the general case, without assuming linearity, monotonicity in observables or unobservables, or separability between observed and unobserved variables in the structural relations.

Keywords

Granger causality, Structural causality, Structural heterogeneity, Distributional heterogeneity, Cross-section, Panel data

Discipline

Econometrics

Research Areas

Econometrics

First Page

1

Last Page

25

Publisher

SMU Economics and Statistics Working Paper Series, No. 04-2016

City or Country

Singapore

Embargo Period

3-14-2016

Copyright Owner and License

Authors

Comments

Published in Econometric Theory, https://doi.org/10.1017/S0266466616000086

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