Time aggregation of mixed causal–noncausal models

We study systematic and flow aggregation of mixed causal-noncausal autoregressive models. We show that aggregation preserves noncausality and generates a moving average component. Monte Carlo simulations demonstrate that backward- and forward-looking behavior can be identified empirically for sufficiently large samples. • Aggregation of MAR models leads to ARMA models for which noncausality is preserved. • MA components generated upon aggregation are invertible-noninvertible. • Systematic and flow aggregation generally create different MA orders. • Model identification after aggregation may be adversely affected. • Simulations show that the identification problem vanishes for larger samples.

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Publication Details

Journal
Economics Letters
Published
2024-10-11
DOI
https://doi.org/10.1016/j.econlet.2024.112019
Primary Topic
Bayesian Modeling and Causal Inference
Type
article
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article

Time aggregation of mixed causal–noncausal models

Sean Telg
Economics Letters
Bayesian Modeling and Causal Inference
article

Time aggregation of mixed causal–noncausal models

Sean Telg
article en

Abstract

We study systematic and flow aggregation of mixed causal-noncausal autoregressive models. We show that aggregation preserves noncausality and generates a moving average component. Monte Carlo simulations demonstrate that backward- and forward-looking behavior can be identified empirically for sufficiently large samples. • Aggregation of MAR models leads to ARMA models for which noncausality is preserved. • MA components generated upon aggregation are invertible-noninvertible. • Systematic and flow aggregation generally create different MA orders. • Model identification after aggregation may be adversely affected. • Simulations show that the identification problem vanishes for larger samples.

Economics LettersVol. 244
Tinbergen Institute (NL)
Openalex Percentile: Top 84%
Bayesian Modeling and Causal Inference
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