I'm doing a study on the determinants of FDI (Foreign Direct Investment) in the ASEAN countries. Before doing a panel data analysis, I'd like to run a Granger Causality Test between the potential FDI determinants time series (GDP, exchange rate, ecc.) and the FDI's one to support the choice of these variables for the above panel analysis.
My questions are:
- Does it make sense?
- If the time series are non-stationary (I've already discovered it with a ADF test) could I (in any case) run the Granger CT or should I have to make time series stationary with some cointegration process before? (and in this case, which one?)
- (the most important) How can I do it with Stata? (I think I have to run a VAR or SVAR before doing the Granger CT, is it correct? does it make sense in non-stationary (unit root) time series?) how should I set up the test? (dependent variable, lag periods, ecc.)
- (and finally) How can I interpret the (Stata Granger CT) results?
thanks in advance to everybody