TITLE:
Properties of Time-Varying Causality Tests in the Presence of Multivariate Stochastic Volatility
AUTHORS:
Daiki Maki
KEYWORDS:
Time-Varying Causality Tests, Wild Bootstrap, Multivariate Stochastic Volatility
JOURNAL NAME:
Open Journal of Statistics,
Vol.6 No.5,
October
8,
2016
ABSTRACT: This paper compares the statistical
properties of time-varying causality tests when errors of variables have
multivariate stochastic volatility (SV). The time-varying causal-ity tests in
this paper are based on a logistic smooth transition autoregressive model. The
compared time-varying causality tests include asymptotic tests,
heteroskedasticity-robust tests, and tests using wild bootstrap. Our simulation
results show that asymptotic tests and heteroskedasticity-robust counterparts
have size distortions under multivariate SV, whereas tests using wild bootstrap
have better size properties regardless of type of error. In particular, the
time-varying causality test with first-order Taylor approximation using wild
bootstrap has better statistical properties.