First of all I would like to share with you why we run granger causality test?

In simple regression we can find that either there is any significant

relationship exist or not between projected variables, but we cant find either
X effecting y or Y effecting X. So in simple wording, granger causality
test is run to see the direction of relationship between proposed variables.

Step#1 go to quick------group statisticsgranger causality

Muhammad saeed Meo, superior university

Lahore Pakistan. Page 1
Step#2. Write the name of your variables in the following box and enter.

Step#3.when you press ok button of above window then, ask for lags, so its up to you how much lags
you need or keep default lags and enter or press ok button.

Muhammad saeed Meo, superior university

Lahore Pakistan. Page 2
Step#4. When you will press ok button of step number three, then following
window will be open.

Interpretation of above results, If probability value comes less than 5% percent than we conclude X,
effect to Y.

For example, like in our case,

GDP does not Granger Cause CO2 40 2.14037 0.1328

Our probability value is .1328 which is more than 5%, means GDP does not be a cause of CO2. Means if
gdp increase or decrease co2 does not effect

Another case

OIL does not Granger Cause CO2 39 5.95157 0.0061

Here we can conclude that oil effect co2, means if oil increase or decrease in this response co2 also
increase or decrease.

Muhammad saeed Meo, superior university

Lahore Pakistan. Page 3
Best of luck thanks for being with me

Muhammad saeed Meo, superior university

Lahore Pakistan. Page 4