Answered

If a variable X Granger-causes a variable Y, this means that
a) Y also Granger-causes X
b) X has a unit root
c) X and its lags helps predict Y
d) A regression of Y on X produces an R-squared of 1




Answer :

Granger causality is a statistical concept of causality that is based on prediction. According to this concept, if a signal X Granger-causes another signal Y, this means that past values of X contain information that helps predict Y above and beyond the information contained in past values of Y alone.

Therefore, the correct answer is:

c) X and its lags help predict Y

This means that including past values of X (and its lags) in a model improves the prediction of Y, compared to a model that includes only past values of Y.

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