Never mind - I got it.
> X Y
> 77.76959 87
> 80 87
> 60 87
> 60
> 60 86
> 60 86.99999
> 70
> 70 92
> 70
> 1. Why does gcause use fewer observations (3
> instead
> of the 6 available)?
Because it is a system of equations, and therefore it
only keeps the observations where also the lagged
variable of Y is nonmissing.
> If I run gcause, I get the following output:
>
> . gcause X Y, lags(1) reg
> Granger causality test
> Sample:
> 2002m11 to 2003m3
>
>
> obs = 3
> H0: Y does not Granger-cause X
>
> F( 1, 1) = 0.00
> Prob > F = 1.0000
>
> chi2(1) = 0.00 (asymptotic)
> Prob > chi2 = 1.0000 (asymptotic)
> 2. Why does it allow to test granger causality if Y
> is dropped in the regression?
The test rejects Granger causality, which is what we
expect since in the three observations used
> X Y
> 77.76959 87
--> 80 87
--> 60 87
> 60
> 60 86
--> 60 86.99999
> 70
> 70 92
> 70
Y is always 87, and therefore it does not explain
anything because it is collinear with the constant.
Raffaella
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