Why Your VECM Causality Results Are Wrong (And How to Fix Them)

🔒 More advanced videos with Datasets (Excel) + Stata Do-files available as Members-Only - Join P.E.R.S here:    / @cruncheconometrix   P.E.R.S Full List:    • Members-only videos   VECM and 3-Ways Causality Checks in EViews - Part 1 Tutorial for MSc Dissertation | UK, US, Canada Are you writing your MSc Economics, Finance, Banking or PhD dissertation using VECM and your supervisor asked you to do 3-ways causality checks - long-run causality, short-run causality, and strong causality - in VECM framework? You are in the right place. 3-ways causality gives you distinction in UK/US/Canada/Australia MSc dissertations because it shows deep understanding of long-run vs short-run dynamics. WHAT YOU WILL LEARN IN THIS VIDEO: ✓ Recap of VECM estimation - must have cointegration via Johansen before VECM - at least one cointegrating vector ✓ What is 3-ways causality in VECM: Long-run causality via Error Correction Term (ECT) t-test, Short-run causality via Wald test on lagged differenced terms, Strong causality via joint Wald test of ECT and short-run terms - explained simply for dissertation students ✓ How to test long-run causality in VECM in EViews - t-test on ECT coefficient - if ECT negative and p below 0.05 = long-run causality from independent variables to dependent variable - speed of adjustment interpretation ✓ How to test short-run causality in VECM in EViews - Wald test on lagged differences - View - Lag Structure - Wald test - null = no short-run causality ✓ How to test strong causality in VECM in EViews - joint Wald test - ECT + short-run terms - null = no strong causality ✓ How to interpret 3-ways causality results: If long-run causality exists but not short-run = adjustment to long-run equilibrium but no immediate effect, If short-run exists but not long-run = immediate effect but no long-run, If both = strong causality ✓ How to report 3-ways causality results in academic format for UK/US dissertation - table with long-run, short-run, strong causality - p-values and decision - what examiners want ✓ Common mistakes MSc students make: Not testing all three ways, confusing long-run with short-run, positive ECT but claiming long-run causality, not reporting p-values ✓ Difference between VECM 3-ways causality and VAR Granger causality / Toda-Yamamoto - when to use which - if cointegrated use VECM causality, if not cointegrated use VAR causality WHO THIS IS FOR: MSc, MBA, PhD Economics, Finance, Banking, Development Economics, Energy Economics students in UK (Warwick, Manchester, Leeds, Birmingham, Glasgow, Edinburgh, LSE), US, Canada, Australia, EU who have estimated VECM and want advanced causality analysis for distinction. OFFICIAL LINKS & COMMUNITY - JOIN 10K+ RESEARCHERS: 🌐 Official Website & Full Courses: https://cruncheconometrix.com 🛒 Data Shop - Datasets & EViews Workfiles: https://cruncheconometrix.com/view/da... 🎓 Members-Only Practical Econometrics Videos:    • Members-only videos   ⭐ Join Channel Membership:    / @cruncheconometrix   👥 Facebook Community:   / cruncheconometrix   💼 LinkedIn Community:   / cruncheconometrix   🔔 Subscribe: https://www.youtube.com/c/CrunchEcono... WHAT IS COVERED IN THIS VIDEO: Recap of VECM estimation - cointegration prerequisite What is 3-ways causality - long-run, short-run, strong - simple explanation Long-run causality via ECT t-test - negative and significant - step-by-step in EViews Short-run causality via Wald test on lagged differences Strong causality via joint Wald test - ECT + short-run Interpreting results - long-run vs short-run vs strong - policy implications How to report 3-ways causality table for UK dissertation - long-run, short-run, strong with p-values Common mistakes and difference between VECM and VAR causality What next - impulse response and variance decomposition If this helped, LIKE, COMMENT your VECM variables and country (I reply to all), SHARE with classmates. FAQ: Q: What is long-run causality in VECM? A: ECT negative and significant p below 0.05 means independent variables cause dependent variable in long-run - speed of adjustment shows how fast equilibrium restored. Q: My ECT positive - can I claim long-run causality? A: No. ECT must be negative and between -1 and 0 for long-run causality. Positive ECT means model misspecified or no long-run causality. #VECM #Causality #3WaysCausality #EViews #LongRunCausality #ShortRunCausality #StrongCausality #ECT #TimeSeries #MScDissertation #UKUniversities #Econometrics #VECMModel #GrangerCausality #EViewsTutorial #DissertationHelp #PhDResearch #TimeSeriesAnalysis" 0:00 Understanding Causality in Time Series 2:05 VECM Model Specifications 3:57 Analyzing Short-Run and Long-Run Effects 5:50 Three Methods for Testing Causality