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    Toda+Yamamoto+example R

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    Anonymous S391ut0
    This document implements the Toda-Yamamoto causality test in R to analyze the relationship between Arabica and Robusta coffee prices. It loads coffee price data, checks for unit roots which indicate the data is I(1), fits a VAR model with a lag of 6, and performs Wald tests. The results show that Arabica Granger-causes Robusta prices at the 10% significance level but not vice versa, indicating a causal relationship runs from Arabica to Robusta prices.

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    Toda+Yamamoto+example R

    Uploaded by

    Anonymous S391ut0
    83 views2 pages
    This document implements the Toda-Yamamoto causality test in R to analyze the relationship between Arabica and Robusta coffee prices. It loads coffee price data, checks for unit roots which indicate the data is I(1), fits a VAR model with a lag of 6, and performs Wald tests. The results show that Arabica Granger-causes Robusta prices at the 10% significance level but not vice versa, indicating a causal relationship runs from Arabica to Robusta prices.

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    Toda+Yamamoto+example.R.txt

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    This document implements the Toda-Yamamoto causality test in R to analyze the relationship between Arabica and Robusta coffee prices. It loads coffee price data, checks for unit roots which indicate the data is I(1), fits a VAR model with a lag of 6, and performs Wald tests. The results show that Arabica Granger-causes Robusta prices at the 10% significance level but not vice versa, indicating a causal relationship runs from Arabica to Robusta prices.

    Copyright:

    © All Rights Reserved
    Download as TXT, PDF, TXT or read online from Scribd
    Download as txt, pdf, or txt
    83 views2 pages

    Toda+Yamamoto+example R

    Uploaded by

    Anonymous S391ut0
    This document implements the Toda-Yamamoto causality test in R to analyze the relationship between Arabica and Robusta coffee prices. It loads coffee price data, checks for unit roots which indicate the data is I(1), fits a VAR model with a lag of 6, and performs Wald tests. The results show that Arabica Granger-causes Robusta prices at the 10% significance level but not vice versa, indicating a causal relationship runs from Arabica to Robusta prices.

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    ################################

    # Toda-Yamamoto causality test #


    # implementation example in R #
    # Example by Dave Giles
    #
    # R-code by Christoph Pfeiffer #
    # 11/8/2012
    #
    ################################
    library(fUnitRoots)
    library(urca)
    library(vars)
    library(aod)
    library(zoo)
    library(tseries)
    #Load data
    cof <- read.csv("http://www.christophpfeiffer.org/app/download/6938079586/coffee
    _data.csv", header=T,sep=";")
    names(cof)
    #Adjust Date format
    cof["Date"]<-paste(sub("M","-",cof$Date),"-01",sep="")
    #Visualize
    plot(as.Date(cof$Date),cof$Arabica,type="l",col="black",lwd=2)
    lines(as.Date(cof$Date),cof$Robusta,col="blue",lty=2,lwd=1)
    legend("topleft",c("Arabica","Robusta"),col=c("black","blue"),lty=c(1,2),lwd=c(2
    ,1),bty="n")
    #Possible structural break in 1970s. Therefore only values from 1976:01 onwards
    are regarded
    cof1<-cof[193:615,]
    #Visualize
    plot(as.Date(cof1$Date),cof1$Arabica,type="l",col="black",lwd=2,ylim=range(cof1$
    Robusta))
    lines(as.Date(cof1$Date),cof1$Robusta,col="blue",lty=2,lwd=1)
    legend("topright",c("Arabica","Robusta"),col=c("black","blue"),lty=c(1,2),lwd=c(
    2,1),bty="n")
    #Test for unit roots
    adf.test(cof$Arabica)
    adf.test(cof$Robusta)
    kpss.test(cof$Arabica)
    kpss.test(cof$Arabica)
    adf.test(diff(cof$Arabica,1))
    adf.test(diff(cof$Robusta,1))
    kpss.test(diff(cof$Arabica,1))
    kpss.test(diff(cof$Robusta,1))
    # Since first order differencing eliminates the unit root, the maximum order of
    integration
    # is concluded to be I(1).
    #Set up VAR-Model
    #select lag order // either 2 or 6
    VARselect(cof1[,2:3],lag=20,type="both")
    #VAR Model, lag=2

    V.2<-VAR(cof1[,2:3],p=2,type="both")
    serial.test(V.2)
    #VAR-Model, lag=6
    V.6<-VAR(cof1[,2:3],p=6,type="both")
    serial.test(V.6)
    # Model with p=6 is less likely to be serially correlated. Thus model with p=6 i
    s selected.
    # Model with additional lag is set up.
    V.7<-VAR(cof1[,2:3],p=7,type="both")
    # Wald-test for the first 6 lags
    # VAR model is seperately set up as a linear model; makes the wald test easier
    #lag variables
    arab<-zoo(cof1["Arabica"])
    robu<-zoo(cof1["Robusta"])
    arab.l<-lag(arab,-(0:7),na.pad=T)
    robu.l<-lag(robu,-(0:7),na.pad=T)
    lm1<-lm(arab~arab.l[,2:8]+robu.l[,2:8]+index(arab))
    lm2<-lm(robu~arab.l[,2:8]+robu.l[,2:8]+index(arab))
    #Wald-test (H0: Robusta does not Granger-cause Arabica)
    vcov(lm1)
    wald.test(b=coef(lm1), Sigma=vcov(lm1), Terms= c(9:14),df=6)
    # Could not be rejected (X2=8.6; p=0.2)
    #Wald.test (H0: Arabica does not Granger-cause Robusta)
    vcov(lm2)
    wald.test(b=coef(lm2), Sigma=vcov(lm2), Terms= c(2:7),df=6)
    # Could be rejected at 10% (X2=12.3; p=0.056)
    # It seems that Arabica Granger-causes Robusta prices, but not the other way aro
    und.

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