On spurious Granger causality

This paper points out that F statistic for testing Granger causality often leads to spurious causality between two independent and irrelative processe s {x(t)} and {y(t)} where one of or both of them is or are non-stationary. To show this we derive non-standard asymptotic distributions of F statistic s and simulate the distributions of them by Monte Carlo experiment under th ree simple data generating processes. (C) 2001 Elsevier Science B.V. All ri ghts reserved.