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Improved Tests for Granger Non-Causality in Panel Data

Xiao, Jiaqi and Juodis, Arturas and Karavias, Yiannis and Sarafidis, Vasilis and Ditzen, Jan (2022): Improved Tests for Granger Non-Causality in Panel Data.

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Abstract

This article introduces the xtgranger command in Stata, which implements the panel Granger non-causality test approach developed by Juodis et al. (2021). This test offers superior size and power performance to existing tests, which stems from the use of a pooled estimator that has a faster sqrt(NT) convergence rate. The test has several other useful properties; it can be used in multivariate systems, it has power against both homogeneous as well as heterogeneous alternatives, and it allows for cross-section dependence and cross-section heteroskedasticity.

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