Granger Causality Test for cousality relations of economic time series and an application

Ill ABSTRACT Science aims to know the relationships between cause and effect correctly and to produce reasonable products from this knowledge. In many scientific areas causality has a great importance, statisticians and econometricians have given an operational definition so that causal relations to be tested and can be predictable. In this study, definition of the causality is given and theoretical details of the causality tests between variables namely Granger, Sims and Haugh are explained in detail. In the last section of the study, a common causality test of Granger is applied to a time series starting from January 1995 to May 2002, and in this time series data set the causal relationship between U.S.$ and export, import values of Turkey is investigated. Computer work is done using Eviews 3.0 and MS Office 2000. Key Words: Causality, Causality Tests, Granger Causality Test, Time Series Analyses.