Time-varying granger causality tests for applications in global crude oil markets: A study on the DCC-MGARCH Hong test

Massimiliano Caporina and Michele Costola

No 324, SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE

Abstract: Analysing causality among oil prices and, in general, among financial and economic variables is of central relevance in applied economics studies. The recent contribution of Lu et al. (2014) proposes a novel test for causality- the DCC-MGARCH Hong test. We show that the critical values of the test statistic must be evaluated through simulations, thereby challenging the evidence in papers adopting the DCC-MGARCH Hong test. We also note that rolling Hong tests represent a more viable solution in the presence of short-lived causality periods.

Keywords: Granger Causality; Hong test; DCC-GARCH; Oil market; COVID-19 (search for similar items in EconPapers)
JEL-codes: C10 C13 C32 C58 Q43 Q47 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-ecm, nep-ene, nep-ets and nep-ore
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:324

DOI: 10.2139/ssrn.3941778

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