Available Balance
Causal data analysis by Granger Causality Test in EViews
October 28, 2014
14

 

As we have learned in previous posts, that, causality defines the relationship between two variables. In this section, we will test the relationship between two unidirectional variable by using Granger causality test in Eviews and then we will study the interpretation of the output generated in Eview.

Granger causality test eviews

 

To investigate the causal relationship between two variables with the help of granger causality test eviews you need to follow below steps:

1. Open Eviews6.exe

2. Click on File -> Open -> Foreign Data as Workfile…

 

Investigate Causality by Granger Causality Test in EViews

 

3. Open the data file “broadband_1 “ by selecting through the path C:\Program Files\SPSSInc\Statistics17\Samples\English

4. Select MARKET_1 and MARKET_2 -> OK

 

Investigate Causality by Granger Causality Test in EViews

 

5. Click on Quick -> Group Statistics -> Ganger Causality Test

 

granger causality test eviews econometrics

 

6. Write down the dependent variables followed by independent variables and then click OK:

 

Investigate Causality by Granger Causality Test in EViews

 

7. Select lags to include = 2 and then click OK:

 

Investigate Causality by Granger Causality Test in EViews

 

8. Following output will be displayed:

Interpretation of Granger causality test Eviews

 

Interpretation of Granger causality test Eviews

 

Two null hypotheses are being displayed in the above output.

If F ≥ 3.84 then H (A) (Alternate hypothesis is accepted)

If F < 3.84 then H (o) (Null hypothesis is accepted)

 

For the null hypothesis 1, in the above figure F ≥ 3.84, therefore Alternate hypothesis is going to be accepted which means MARKET_2 Causes MARKET_1.

Whereas, for the null hypothesis 2, in the above figure F < 3.84, therefore null hypothesis is going to be accepted which means MARKET_1 does not Causes MARKET_2.

Hence this proves that the above cause and effect relationship is unidirectional and not bidirectional.

 

For further details click here granger causality test eviews.

 

 

Rate This Content




    1. Brother where you get the value of 3.84. kindly explain.

       
      • 3.84 is the criteria for F value to test which hypothesis is accepted. This is a globally verified criteria and this is how it is.

         
    2. 3.84 is the criteria for F value to test which hypothesis is accepted. This is a globally verified criteria and this is how it is.

       
    3. Wow that was unusual. I just wrote an very long comment but after I clicked submit my comment didn’t show up.
      Grrrr… well I’m not writing all that over again.
      Anyways, just wanted to say excellent blog!

       
    4. Sound deep to me.
      What is this method used for? I doubt the banks use it to analyze products or sales.

       
    5. hmm nice

       
    6. Sounds like a very complicated formula to understand. I tried but did not fully understand the model. I hope this works for you.

       
    7. can we just use prob value for the decision rule? like 0.05 =reject the null

       
    8. Great and detailed technical overview.

       
    9. Yes. The P-values can serve the same purpose. You however notice that whenever the F is greater than or equal to 3.84, the P-value will also be less than or equal to 0.05. Thus both approaches yield same conclusions.

       
    10. Great. Thanks

       
    11. when both the null and the alternative hypothesis is less than 0.05, is there Bidirectional causality?

       
    12. wow that is great work and well written articles thanks for the details

       
    13. Pardon me for I find it too dark to understand what you are talking about Granger causality test eviews. I know you are presenting some steps on how to follow and get the results. But what we need is the background of this eviews. Where is the appropriate application or use of this test?

      Is this about a mathematics? Physics? Or whatever? I noticed that most of those who have left their comments are in big quandary, in a state of confusion. What we are actually expecting is something that we could put our opinion for that subject that we have known, for the facts that we could infer their applicability.

      I wonder why that the admin has approved this kind of post which most of us here couldn’t benefit. I am not saying that it would be recalled. In a simplest term, we need a background to where this is being applied. If there is, sorry if I missed it.

       

    Leave a reply

    Your email address will not be published.