Nowcasting causality in mixed frequency vector autoregressive models

This paper introduces nowcasting causality as the mixed-frequency version of instantaneous causality. We analyze the relationship between nowcasting and Granger causality in a mixed-frequency VAR and illustrate its impact on the significance of high-frequency variables in mixed-frequency conditional...

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Bibliographic Details
Published in:Economics letters 2014-01, Vol.122 (1), p.74-78
Main Authors: Götz, Thomas B., Hecq, Alain
Format: Article
Language:English
Subjects:
Causality
Economic models
Economic theory
Frequency
Granger causality
Instantaneous causality
Mixed-frequency regression
Mixed-frequency VAR
Regression analysis
Risk assessment
Risk management
Studies
Vector-autoregressive models
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Summary:This paper introduces nowcasting causality as the mixed-frequency version of instantaneous causality. We analyze the relationship between nowcasting and Granger causality in a mixed-frequency VAR and illustrate its impact on the significance of high-frequency variables in mixed-frequency conditional models. •Nowcasting causality (NC) is the mixed-frequency version of instantaneous causality.•We analyze the impact of NC on Granger causality (GC) in reduced-form VAR models.•Mixed-frequency conditional models can merge the implications of GC and NC.•The results are illustrated in a Monte Carlo study and several empirical applications.
ISSN:0165-1765
1873-7374
DOI:10.1016/j.econlet.2013.10.037