Evidence for Nonlinear Asymmetric Causality in US Inflation, Metal, and Stock Returns

The purpose of this paper is to propose a version of causality testing that focuses on the role of the sign of the returns on the causality results. We replace the traditional VAR specification used in the Granger causality test by a discrete-time bivariate noisy Mackey-Glass model. Our test reveals interesting and previously unexplored relationships in U.S. economic series, including inflation, metal and stock returns.

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