Time aggregation and the contradictions with causal relationships : can economic theory come to the rescue?

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Authors

Gupta, Rangan
Komen, Kibii

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Volume Title

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Bureau for Economic Research and the Graduate School of Business, University of Stellenbosch

Abstract

The literature on causality takes contradictory stands on the direction of causal relationships based on whether one uses temporally aggregated or systematically sampled data. As an example, using the relationship between a nominal target and the instrument used to achieve it, we show that one can fall back upon the data in itself, and analyse it from the perspective of economic theory, not only as a source of second opinion to econometric theories and Monte Carlo simulations, but also to draw proper conclusions regarding the form of the causal relationship that might be actually existing in the data.

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Keywords

Temporal aggregation, Systematic sampling, Granger causality, Cointegration, Error correction models

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Citation

Gupta, R & Komen, K 2009, 'Time aggregation and the contradictions with causal relationships: can economic theory come to the rescue?', Studies in Economics and Econometrics, vol. 33, no. 1, pp. 13-24. [http://www.journals.co.za/ej/ejour_bersee.html]