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An Improved Nonlinear Granger Causality Test Method

Nan Zhang, Mingwei Li, Qinqin Tang


In order to solve the problem that the traditional linear Granger causality test method cannot capture nonlinear characteristics, this paper proposes the nonlinear Granger causality test method by improving the smooth transition function of the smooth transition autoregressive (STAR) model. The empirical study examines the Granger causality between Consumer Price Index (CPI) and Producer Price Index for Industrial Products (PPI) from both linear and nonlinear perspectives, and the results show that the method has higher robustness.


Nonlinear Granger Causality Test; Smooth Transition Autoregressive Model; Consumer Price Index; Producer Price Index For Industrial Products

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DOI: http://dx.doi.org/10.18686/fm.v8i2.6980