Long-Run Causality, with an Application to International Links between Long-Term Interest Rates

29 Pages Posted: 5 Jan 2011

See all articles by Catherine Bruneau

Catherine Bruneau

Université Paris X Nanterre; Université Paris I Panthéon-Sorbonne

Eric Jondeau

University of Lausanne - Faculty of Business and Economics (HEC Lausanne); Swiss Finance Institute

Date Written: June 1, 1998

Abstract

In this paper we give a precise definition of long-run causality in a multivariate non-stationary, possibly cointegrated, framework. A variable is said to be causal for another in the long run if knowledge of the past of the former improves long-run predictions of the latter. In a VAR framework, we show that long-run non-causality can be easily tested with a Wald statistics, conditionnally on the cointegration rank. The methodology is used to study long-run causal links between US, German, and French long-term interest rates from January 1990 to June 1997.

Keywords: Causality, Prediction Improvement, Cointegration

JEL Classification: C12, C32

Suggested Citation

Bruneau, Catherine and Jondeau, Eric, Long-Run Causality, with an Application to International Links between Long-Term Interest Rates (June 1, 1998). Banque de France Working Paper No. 53, Available at SSRN: https://ssrn.com/abstract=1734664 or http://dx.doi.org/10.2139/ssrn.1734664

Catherine Bruneau (Contact Author)

Université Paris X Nanterre ( email )

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Université Paris I Panthéon-Sorbonne ( email )

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France

Eric Jondeau

University of Lausanne - Faculty of Business and Economics (HEC Lausanne) ( email )

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Switzerland
+41 21 692 33 49 (Phone)

HOME PAGE: http://people.unil.ch/ericjondeau/

Swiss Finance Institute ( email )

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