Limitations
As its name implies, Granger causality is not necessarily true causality. If both X and Y are driven by a common third process with different lags, one might still accept the alternative hypothesis of Granger causality. Yet, manipulation of one of the variables would not change the other. Indeed, the Granger test is designed to handle pairs of variables, and may produce misleading results when the true relationship involves three or more variables. A similar test involving more variables can be applied with vector autoregression.
Read more about this topic: Granger Causality
Famous quotes containing the word limitations:
“The motion picture made in Hollywood, if it is to create art at all, must do so within such strangling limitations of subject and treatment that it is a blind wonder it ever achieves any distinction beyond the purely mechanical slickness of a glass and chromium bathroom.”
—Raymond Chandler (1888–1959)
“... art transcends its limitations only by staying within them.”
—Flannery O’Connor (1925–1964)
“Growing up means letting go of the dearest megalomaniacal dreams of our childhood. Growing up means knowing they can’t be fulfilled. Growing up means gaining the wisdom and skills to get what we want within the limitations imposed by reality—a reality which consists of diminished powers, restricted freedoms and, with the people we love, imperfect connections.”
—Judith Viorst (20th century)