Tests of Causality
The Message in the Innovations
University of Rochester, Rochester, NY 14627
and National Bureau of Economic Research
Carnegie-Rochester Conference Series on Public Policy, 10 (Spring 1979) 55-96
This paper describes new time series techniques and shows the advantages and disadvantages of these techniques
compared with more traditional methods. Cross-correlation analysis of residuals from autoregressive-integrated-
moving average (ARIMA) models to determine the predictive relations between two variables. I conclude that it is
important to consider the power of this procedure before putting much faith in empirical results that seem
to find a "lack of relationship" between economic variables.
Key words: Causality tests, ARIMA
JEL Classifications: C22
Cited 53 times in the SSCI through April 1996
© Copyright 1979, Elsevier
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