Inference on one-way effect and evidence in Japanese macroeconomic data

This paper provides an approach to testing a variety of causal characteristics expressed in terms of the measures of one-way effect for cointegrated vector time series. For this purpose, we propose Wald tests and their computational algorithm by means of the measures of one-way effect, incorporating Johansenʹs algorithm for the maximum likelihood estimates and the likelihood ratio tests. Using the Wald test statistics, the paper also provides a method of confidence-set construction for the causal measures. The approach proposed in the paper includes testing Grangerʹs non-causality as an instance of its multiple applications. As an illustration, the paper presents a characterization of the causal structure of the recent Japanese macroeconomy on the basis of the proposed method and the derived evidence.