The passing of Sir Clive Granger at the age of 74 due to a brain tumour has left a mark on the world of economics. His pioneering work in the field of forecasting time series data revolutionised the discipline of econometrics. His methods for analysing economic time series have become the standard currency in the field, and researchers cannot perform empirical work on economic time series without using some of his techniques or being influenced by his ideas.
His most significant contribution was the development of methods to analyse the linkages and behaviour between economic time series, which ultimately earned him the Nobel Prize in Economic Sciences in 2003. Prior to this, the statistical theory underpinning the subject assumed that economic time series were stationary, fluctuating randomly around a common long-term average or trend. Granger, in his doctoral thesis at Nottingham University in the 1950s, established that not all economic data conformed to these assumptions, and identified that the non-stationary nature of economic data would have profound implications for measuring the underlying relationships between them. He built on the integrated data work of British statisticians George Box and Gwilym Jenkins and created methods that modelled and analysed relationships between evolving integrated economic variables. His work transformed the field of econometrics, led to significant breakthroughs in statistics, and rationalised economic theory and real-time series data.
Born in Swansea, south Wales, to Edward and Evelyn Granger, Clive had very little memory of his life before Lincoln. His father was employed by Chivers, the jam company, at the time, which caused the family to relocate to Cambridge during the Second World War. After the war, they moved to West Bridgford, a middle-class suburb of Nottingham, where Clive attended a grammar school. Initially, his academic progress was unexceptional. Still, after being encouraged by his parents, he developed a passion for mathematics which was encouraged at university. He secured a degree in mathematics with economics and later secured a PhD in statistics. He then went on to accept an assistant lectureship in statistics at Nottingham in 1956 while still working on his doctorate.
Granger published several influential research papers during the following years, which enhanced his reputation as an economist. These included topics such as the spectral shape of economic time series and Granger causality, which tested for a form of causality between time series variables. His international reputation grew as he was appointed to the position of reader in econometrics in 1964, and he rose to the rank of professor in 1965. In 1974, he left Nottingham to join the University of California, San Diego and continued creating pioneering work for the rest of his life.
In 1974, Granger and Newbold published an article that uncovered misleading statistical relationships between economic time series and proved how such connections were in fact spurious. They discovered that the occurrence of such relationships was caused by integrated economic variables, which wandered over time without attaining a long-term resting point. This phenomenon was first identified by GU Yule in the Journal of the Royal Statistical Society in 1926.
At the inauguration of the Granger Centre for Time Series Econometrics at Nottingham in June 2006, Granger reminisced that economists had initially been skeptical of their results. This was because the findings required a complete shift in how economic time series relationships were modeled. In 1974, Granger began working with Engle, which led to the revolutionizing of empirical research on economic time series. They coined the term ‘co-integration’ to describe the authentic causal long-run relationships between non-stationary time series. In essence, co-integration is a shared element of a common trend that drives the non-stationarity of multiple time series.
The discovery of co-integrated relationships allowed numerous integrated variables to be combined in a manner that enabled the use of standard econometric methods. This provided reliability in economic time series applications and thus earned Granger and Engle the Bank of Sweden Nobel Memorial Prize in Economic Sciences in 2003.
Granger received a knighthood in 2005, and Nottingham’s economics and geography department building was renamed the Sir Clive Granger Building. Granger, known for his modesty, credited his success to simple factors, such as choosing good collaborators, attracting excellent students, working hard, and having a few good ideas. Granger was survived by his wife, Patricia Loveland, and their two children, Mark and Claire.
