The Relation of Different Concepts of Causality in Econometrics

University of St.Gallen, Department of Economics, Discussion Paper Series No. 2006-15

25 Pages Posted: 14 Jul 2006

See all articles by Michael Lechner

Michael Lechner

University of St. Gallen - Swiss Institute for Empirical Economic Research

Date Written: June 2006

Abstract

Granger and Sims non-causality (GSNC) are compared to non-causality based on concepts popular in the microeconometrics and programme evaluation literature (potential outcome non-causality, PONC). GSNC is defined as a set of restrictions on joint distributions of random variables with observable sample counterparts, whereas PONC combines restrictions on partially unobservable variables (potential outcomes) with different identifying assumptions that relate potential to observable outcomes. Based on a dynamic model of potential outcomes, we find that in general neither of the concepts implies each other without further assumptions. However, identifying assumptions of the sequential selection non observable type provide the link between those concepts, such that GSNC implies PONC, and vice versa.

Keywords: Granger causality, Sims causality, Rubin causality, potential outcome model, dynamic

JEL Classification: C21, C22, C23

Suggested Citation

Lechner, Michael, The Relation of Different Concepts of Causality in Econometrics (June 2006). University of St.Gallen, Department of Economics, Discussion Paper Series No. 2006-15, Available at SSRN: https://ssrn.com/abstract=914102 or http://dx.doi.org/10.2139/ssrn.914102

Michael Lechner (Contact Author)

University of St. Gallen - Swiss Institute for Empirical Economic Research ( email )

Varnbuelstrasse 14
St. Gallen, 9000
Switzerland
+41 71 224 2320 (Phone)

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