Introduction:

As students of econometrics we are required to use theory and data from

economics along with statistics tool and techniques to build a model that
express the relationship between various economic variables . in this project
we apply these techniques we have learned during this semester to build a
model that express the relationship between Gross domestic product (GDP)
of Bahrain and the factors that affect it which we can use to estimate
Bahrains future Gross domestic product (GDP) . the model then goes
through a set of econometrics tests in order to evaluate the goodness of this
model in expressing the relationship between these factors and GDP.
To estimate this model we will use four variables :
1- Gross domestic product of Bahrain as the dependent variable (Y)
2- Oil prices ( oil is the largest contributor to Bahrain GDP) as an
independent variable (X2).
3- Real interest rate ( the second contributor to Bahrains GDP is the
financial sector) as an independent variable (X3)
4- Money supply (M2 is a major economic indicator) as an independent
variable (X4)

the model will comes as follows:

1- The population regression function:

2- The sample regression function (the estimator of PRF):

To estimate this model we will use various statistics techniques:

1- Multiple linear regression .
2- Multiple log- linear regression.
3- Semi log regression model.
4- The linear trend model.
5- Reciprocal models (inverse).
we use certain statistical tests to test the model for the following:
1- MULTICOLLINEARITY.
2- HETEROSCEDASTICITY
3- AUTOCORRELATION.

1. THE DATA:
We collected a 20 years data about Bahrain GDP, oil prices, Real
interest Rate and Money supply (M2).

year
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005

GDP
1558
1539
1630
1702
1826
1858
1982
2237
2231
2319
2414
2490
2610
2723
2865
2997
3153
3381
3572
3853

oil
prices
5.44
6.95
5.63
6.87
8.95
7.54
7.29
6.40
5.96
6.42
7.79
7.20
4.79
6.78
10.74
9.22
9.44
10.87
14.43
20.56

I (%)
31.9
6.8
5.68
4.35
3.5
11.58
15.95
14.41
3.26
10.62
12.23
11.29
20.42
8.96
-2.27
16.51
7.18
1.2
0.25
-1.64

M2
885
968
1008
1052
955.7
1146.7
1202.5
1271.6
1347.4
1447.5
1492.4
1609.5
1876.1
1956.7
2156.7
2356
2599.6
2764.9
2879.6
3512.8

2. MODEL ESTIMATION:

2.1Multiple linear regression Model:

After regressing GDP (dependent variable, Y) on oil prices (X2),

Real interest rate (X3) and Money supply (X4) , we obtained the
following results:

Regression Statistics
Multiple R
R Square
Adjusted R
Square
Standard
Error
Observations

df
Regression

Residual

16

Total

19

SS
881456
2
274824.
2
908938
6

0.98476
6
0.96976
4
0.96409
5
131.059
2
20

MS
293818
7
17176.5
1

F
171.058
4

Significan
ce F
2.3E-12

Coefficie
nts
980.521
7

Stand
ard
Error
118.64
52

oil prices

-22.6263

15.664
02

I (%)

-2.09049
0.97249
5

4.4790
62
0.0679
65

Intercept

M2

t Stat
8.2643
16
1.4444
8
0.4667
3
14.308
68

Pvalue
3.63E07
0.1679
02
0.6469
88
1.55E10

Lower
95%
729.00
5
55.832
6
11.585
7
0.8284
15

Upper
95%
1232.0
38
10.579
89
7.4046
94
1.1165
75

Lower
95.0%
729.00
5
55.832
6
11.585
7
0.8284
15

From the result above we obtained the following estimate of the

model :

Interpretation of the regression results:

1. Intercept : 980.5217 is the average value of GDP when oil

prices, I (%) and M2 equal to zero.
2. Slopes:
A. Oil prices coefficient : is the partial rate of change of
average GDP, when Oil prices increases by 1 BD GDP will
decrease by -22.6263 holding other factors ( I%, M2 )
constant.
B. I(%) coefficient : is the partial rate of change of average GDP
,when I(%) increases by one unit GDP will decrease by
-2.09049 holding other factors(oil prices, M2) constant.
C. M2 coefficient: is the partial rate of change of average GDP,
when M2 increases by one unit GDP will increase by
0.972495 holding other factors (oil prices , I(%)) constant.

Upper
95.0%
1232.0
38
10.579
89
7.4046
94
1.1165
75

3.

: equal to 0.969764 which means that 96.9764% of the

variation in GDP is explained by the variation in oil prices,

I(%) and money supply.

4.

: we use this for multiple regression and its equal

to 0.964095 which means that 96.4095 % of the variation

in GDP is explained by the variation in oil prices, I(%) and

Money supply (M2).

HYPOTHESIS TESTING:

1. Testing the joint Hypothesis :

(the model is insignificant )

( the model is significant )

Since F stat=171.0584 is > F critical

=0.0000000000023,then we reject null

hypothesis that

and accept the

alternative hypothesis, the entire model is significant.

2. Testing Hypothesis about the individual partial regression

coefficients:

A- oil prices coefficient:

At 95% confidence , t critical is 2.120

Since |t| stat is 1.44448 is less than t critical of

2.120, we accept the null hypothesis that b2=0

which means that oil prices has no effect on
GDP(insignificant ).

B- I(%) coefficient:

At 95% confidence t critical is 2.120.

Since |t| stat is 0.46673 is less than critical t of

2.120, then we accept the null hypothesis that
b3=0 which means that I(%) has no effect on
GDP (insignificant).

C- M2 coefficient :

At 95% confidence t critical is 2.120

Since |t| stat is 14.30868 greater than t critical of

2.120 , then we reject the null hypothesis of

b4=0 which means that M2 has an effect of
GDP (significant).

2.2

Multiple log-linear regression model (double log):

This model is used to measure elasticity. in order to

apply this model we took the (ln) of all dependent and
independent variables and regress them.

The following results were obtained:

Regression Statistics
Multiple R

0.983842

R Square
Adjusted R
Square

0.967945

Standard Error

0.055051

0.961934

Observations

df
Regression

Residual

16

Total

19

Intercep
t

2.870689

Stand
ard
Error
0.2723
94

ln oil
prices

-0.01701

0.0649
62

ln I(%)

-0.00137

ln M 2

0.669496

Coefficie
nts

0.0157
46
0.0435
31

SS
1.4642
17
0.0484
91
1.5127
08

t Stat
10.538
73
0.2619
0.0867
9
15.379
81

Pvalue
1.32E08
0.7967
4
0.9319
18
5.25E11

20

MS
0.4880
72
0.0030
31

Lower
95%
2.2932
39
0.1547
3
0.0347
5
0.5772
14

F
161.04
49

Upper
95%
3.4481
39
0.1206
99
0.0320
14
0.7617
77

Significan
ce F
3.67E-12

Lower
95.0%
2.2932
39
0.1547
3
0.0347
5
0.5772
14

From the result above we obtained the following estimate of the

model :

Upper
95.0%
3.4481
39
0.1206
99
0.0320
14
0.7617
77

Interpretation of the regression results:

1. Intercept: 2.870689 is the average value of ln

GDP when ln oil prices, ln I(%) and ln M2 equal to

zero.
2. Slopes:
A. ln oil prices coefficient : is the partial elasticity
of GDP with respect to oil prices, when oil
prices increases by 1%, GDP will decrease by
0.01701%. holding other factors (ln I(%),ln M2)
constant. (Inelastic).

B. ln I(%) coefficient :is the partial elasticity of

GDP with respect to I(%) , when I(%) increases
by 1% GDP will decrease by 0.00137. holding
other factors( ln oil prices, ln M2) constant.
(inelastic).

C. ln M2 coefficient : is the partial elasticity of GDP with

respect to M2. When M2 increase by 1% GDP will increase
by 0.669496%. holding other factors (ln oil

prices, ln I(%)) constant. (inelastic).

3.

: equal to 0.967945 which means that 96.7945% of

the variation if ln GDP is explained by the variation in
ln oil prices, ln I(%) and ln M2.

4.

: we use this for the multiple regression , its

equal to 0.961934 which mean that 96.1934% of the
variation in ln GDP is explained by the variation in ln
oil prices, ln I(%) and ln M2.

Hypothesis testing:-

1. Testing the joint hypothesis :

(the model is insignificant )

( the model is significant )

Since F stat =161.0449 is greater than F critical of

0.00000000000367. , then we reject the null

hypothesis and accept the alternative
hypothesis . which means that the entire model is
significant.
2. Testing Hypothesis about the individual partial
regression coefficients:

oil prices

I(%)

M2

Coefficient
s

Significanc
e at = 0.05

P-value

-0.01701

0.7967
4

no

-0.00137

0.9319
18

no

0.669496

5.25E11

yes

Accept the following:

, which means that ln oil prices has no

effect on ln GDP, insignificant.

, which means that ln I(%) has no

effect on ln GDP, insignificant .

Reject the following:

which means that ln M2 has an effect

on ln GDP, significant .

Return to scale:
It is the sum of all slopes of ln model except
the intercept
Which equals to 0.651116 and its less than
one which it means that it is a decreasing
return to scale , if input (ln oil prices, ln I (%),
ln M2 ) increases by 1% output (ln GDP) by
less than 1%.

2.3

semi log model ( Growth rate):-

This model is used to measure the Growth rate. We regressed

ln GDP on time. This will measure GDP Growth rate over this
period.

ln GDP
time
7.351158
7.338888
7.396335
7.439559
7.509883
7.527256
7.591862
7.712891
7.710205
7.748891
7.78904
7.820038
7.867106
7.909489
7.960324
8.005367
8.05611
8.125927
8.180881
8.256607

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

The results of this regression are:

Regression Statistics
Multiple R
R Square
Adjusted R
Square
Standard
Error

0.99613
8
0.99229
1
0.99186
3
0.02545
2

Observations

df
Regressi
on
Residual
Total

SS
1.50104
1
7
0.01166
18
1
1.51270
19
8

Stand
ard
Error

Interce
pt
7.266034
time

Coefficie
nts

0.04751

20

MS
F
1.50104 2317.06
7
3
0.00064
8

Significan
ce F
1.79E-20

t Stat

Pvalu
e

Lower
95%

Upper
95%

Lower
95.0%

Upper
95.0%

0.0118
23

614.54
56

2.35
E-40

7.2411
94

7.2908
75

7.2411
94

7.2908
75

0.0009
87

48.135
88

1.79
E-20

0.0454
37

0.0495
84

0.0454
37

0.0495
84

The estimated model:

0.04751 means that on the average ln GDP has

been increasing by 0.04751 (or 4.751 percent )
per year.

Instantaneous and Compound rate of growth:

1. Instantaneous rate of growth: it is the same as the coefficient of time

, so we can say than on average ln GDP has been increasing by 4.751
percent per year.

2. Compound rate of growth:

The compound rate of growth of Bahrains GDP had been at the rate
of 4.87 percent per year.

2.4

the linear trend model :

In this model we regress Y on time itself (trend variable).the regression

results are as follows:

Regression
Statistics
Multiple R
R Square
Adjusted R
Square
Standard
Error
Observation
s

0.9850
15
0.9702
55
0.9686
02
122.55
7
20

df
Regressi
on

Residual

18

Total

19

Coefficie
nts
Interce
pt
1237.826
time

115.1594

2.5

Stand
ard
Error
56.931
6
4.7525
58

SS
881902
2
270364
.1
908938
6

t Stat
21.742
34
24.231
03

MS
881902
2
15020.
23

Pvalu
e
2.27
E-14
3.43
E-15

F
587.14
3

Lower
95%
1118.2
17
105.17
46

Significan
ce F
3.43E-15

Upper
95%
1357.4
35
125.14
42

Lower
95.0%
1118.2
17
105.17
46

The time coefficient is positive which means that

there is an upward trend in Bahrains GDP.
Bahrains GDP had been increasing by 115.1594
percent per year.

Reciprocal Model (Inverse):

In this model we took the inverse of each independent variable

and we regressed GDP on them. The model is as follows:

Upper
95.0%
1357.4
35
125.14
42

The following results were obtained from the regression:

Regression Statistics
Multiple R
R Square
Adjusted R
Square
Standard
Error
Observation
s

df
Regressi
on

Residual

16

Total

19

SS
878338
3
306002
.7
908938
6

0.9830
23
0.9663
34
0.9600
22
138.29
38
20

MS
292779
4
19125.
17

F
153.08
6

Significan
ce F
5.43E-12

Interce
pt

Standa
Coefficie
rd
nts
Error
4380.46 121.90
9
82

1/ oil
prices

-3277.62

1027.9
63

1/I (%)

41.8823
4

36.232
09

1/M 2

2209273

15026
2.9

t Stat P-value
35.932 9.95E53
17
3.1884 0.0057
6
15
1.1559
46
14.702
7

0.2646
73
1.03E10

Lower
95%
4122.0
35
5456.8
1
34.926
3
25278
16

Upper
95%
4638.9
03
1098.4
3
118.69
09
18907
29

Lower
95.0%
4122.0
35
5456.8
1
34.926
3
25278
16

The estimated model is as follows:

Intercept: 4380.469 is the average value of GDP when

the inverse of oil prices, I(%) and M2 equal to zero

1/oil prices coefficient :is the partial rate of change of

GDP, when 1/ oil prices increases by one percentage
point GDP will decrease by

118.69
09
18907
29

(holding other factors

constant).

Upper
95.0%
4638.9
03
1098.4
3

1/I(%) coefficient: is the partial rate of change of GDP .

when the inverse of I(%) increases by one percentage
point, GDP will increase by 41.88234 (holding other
factors constant ). Its analogous to the negative slope
in the linear model.

1/M2: its the partial rate of change of GDP , when the

inverse of M2 increases by one percentage point GDP
will decrease by 2209273 holding other factors
constant. Its analogous to the positive slope in the
linear model
: its equal to 0.966334 which mean that
96.6334% of the variation in GDP is explained by
the variation in 1/oil prices, 1/I(%) and 1/M2. And
since the dependent variable of MLR and this
model are in the same form we can compare their
.despite the high

of 96.6334 the MLR

96.9764% which means that the MLR model if the data

better than this model.

: equal to 0.960022 which mean that

96.60022% of the variation in GDP is explained by
the variation in 1/oil prices,1/I(%), 1/M2.

Hypothesis testing:-

1. Testing the joint hypothesis :

(The model is insignificant)

(The model is significant)

Since F stat = 153.086 greater than F critical of

0.00000000000543, we reject null hypothesis and

accept the alternative hypothesis which means
that the entire model is significant.

2. Testing Hypothesis about the individual partial

regression coefficients:

Coefficient
s
oil prices

I(%)

M2

P-value

Significanc
e at = 0.05

-3277.62

0.0057
15

yes

41.88234

0.2646
73

no

-2209273

1.03E10

yes

Accept:
which means that 1/ I(%) has no effect
on GDP, insignificant .

Reject :
which means that 1/oil prices has an
effect on GDP, significant .

which means that 1/ M2 has an effect

on GDP, significant .

3. TESTING THE MODEL:

3.1 MULTICOLLINEARITY:
We tested the estimated model for MULTICOLLINEARITY through these
following methods:
A- High R2 but few significant t ratios:

As we saw earlier in the model estimation section that the R2 of

this model is quit high, about 96.9764% which means that a
high percentage of the variation in GDP is explained by
the variation in the independent variable of this model
even though only one slope coefficient (M2) is
significant(

. Therefore from this observation we

detected the problem of MULTICOLLINEARITY.

B- High pair wise correlation among explanatory :

to conduct this test we have to calculate the coefficient

correlation between each pair of independent variable .

the results were as follows :

oil
prices
oil
prices
I (%)

1
0.5791
5

M2

0.8120
13

I (%)

1
0.435
67

M2

From this table we can see that there is a possibility that as

serious collinearity exists between oil prices and M2

C- Subsidiary or auxiliary regression:

In this test we regress each independent variable on the

remaining independent variables of this model. And then we test
the null hypothesis that

After regression each independent variable on the remaining

independent variables , we obtained these following results:

Value of
R2

Value of F
stat

F
significant

Is it
significant?

Oil prices on
other X's

0.72206
2

22.08232

1.87742E05

Yes

(I) (%) on other

X's

0.33893
4

4.35803

0.029654

M2 on other X's

0.66116
7

16.58609

0.000101

Yes

Yes

This table shows that, oil prices I(%) and M2 seems to be

collinear with the other Xs.

D- The variance inflation factor:

Value of R2

VIF

Oil prices on other X's

0.722062

3.597921

(I) (%) on other X's

0.338934

1.512709

M2 on other X's

0.661167

2.951304

Since all VIF are less than 5 then MULTICOLLINEARITY is not

considered as problem for these variables.

3.2

HETEROSCEDASTICITY:

We tested the estimated model for HETEROSCEDASTICITY using these

following techniques:
A- Graphical examination of Residuals :
After plotting the residuals against
obtained

, the following graph was

The graph suggests that the squared residuals (

are related to

Predicted GDP. The graph raises the possibility the model suffers from the problem of
HETEROSCEDASTICITY.

B- Park test:
To do this test we need to regress

The following results were obtained:

on

. The model is as follows:

Regression Statistics
Multiple R
0.3536
df
SS
MS
21
6.208448
6.20844
R Square
0.1250
1
38848
839
43.44007
2.41333
Adjusted R
0.0764
18
806 4
767
Square
49.64852
Standard Error
1.5534
19
64592

Regression
Residual
Total

Observations

Intercept
ln
predectid
GDP

Standa
Coefficie
rd
nts
Error
10.372
25.33219
1
-2.14044

1.3345
1

t Stat
2.442
35
1.603
92

F
2.5725
57

Significa
nce F
0.126134

20

Pvalue
0.0251
38
0.1261
34

Lower Upper Lower

95%
95% 95.0%
3.5412 47.12 3.541
81
31
28
4.9441 0.663 4.944
4
25
1

Hypothesis testing:
(no HETEROSCEDASTICITY)

(HETEROSCEDASTICITY exists)

Since p value of

is 0.126134 which greater

than 5% , we accept the null hypothesis that no

HETEROSCEDASTICITY exists .

Upper
95.0%
47.123
1
0.6632
54

C- Glejser test:

We will test the model in three functional form:

1.

The result from the regression are:

Intercep
t

185.473

Stand
ard
Error
50.836
25

Predicte
d GDP

-0.0349

0.0200
5

Coeffici
ents

t
Stat
3.64
84
1.74
1

Pvalue
0.0018
38

Lowe
r 95%
78.66
99

Upp
er
95%
292.
28

0.0988
28

0.077

0.00
72

Lowe
r
95.0
%
78.66
99

Upper
95.0
%
292.2
76

0.077

0.007
23

Hypothesis testing:
(no HETEROSCEDASTICITY)

(HETEROSCEDASTICITY exists)

Since the P value of

is 0.098828 which is greater than

5% , we accept the null hypothesis that no

HETEROSCEDASTICITY exists .

2.

The results from the regression are:

Intercept
S.R
predicted
GDP

Coefficie
nts

Standa
rd
Error

280.447
8

100.21
14

-3.67847

2.0258
17

t Stat

P-value

Lower 95%

Upper
95%

Lower
95.0%

Upper
95.0%

2.798562
2
1.815796
2

0.011873
25

69.9114964

490.9842

69.9115

490.98
42

0.086097
13

-7.93455296

0.577613

7.93455

0.5776
13

Hypothesis testing :
(no HETEROSCEDASTICITY)

(HETEROSCEDASTICITY exists)

Since P value of

coefficient is 0.08609713 which is

greater than 5% then we accept the null hypothesis that no

HETEROSCEDASTICITY exists .

3.

The results from the regression are:

Intercept
1/predict
ed GDP

Coefficie
nts

Stand
ard
Error

-4.55623
239363.7

Pvalue

54.599
38

t Stat
0.0834
5

0.9344
16

12128
7.3

1.9735
26

0.0639
89

Hypothesis testing :
(no HETEROSCEDASTICITY)

Lower
95%
119.26
5
15451.
6

Upper
95%
110.15
28
49417
8.9

Lower
95.0%
119.26
5
15451.
6

Upper
95.0%
110.15
28
49417
8.9

(HETEROSCEDASTICITY exists)

is 0.063989 which is greater

Since the P value of

than 5% , then we can accept the null hypothesis

that no HETEROSCEDASTICITY exists.
D- Whites General Heteroscedasticity Test:

After estimating the following model:

We obtain the following results:

Regression
Statistics
Multiple R

0.592936

R Square
Adjusted R
Square

0.351573

Standard Error

14283.73

Observations

df
Regressi
on

Residual

12

Total

19

SS
13274541
08
24482980
94
37757522
03

-0.02668
20

MS
189636301.2
204024841.2

F
0.92947652
9

Significance
F
0.51820865
1

Coefficie
nts

Standar
d Error

t Stat

Interce
pt

66579.9
2

54489.6
04

1.2218829
11

0.245211
952

oil
prices
I (%)

1486.25
1
1485.90
9

6976.18
57
2610.27
88

0.834867
256
0.579684
09

M2

-65.8955

47.7205
35

-140.98

324.753
57

-60.3418

60.3304
13

0.2130463
18
0.5692528
42
1.3808631
92
0.4341136
65
1.0001894
84

M2^2

0.01639
9

0.01424
61

0.272102
189

oil*I*M
2

-0.02608

0.10487
53

1.1511233
49
0.2487082
53

oil^2
I^2

Hypothesis testing:

P-value

0.192496
782
0.671908
599
0.336961
058

0.807791
994

Lower
95%
52142.731
9
13713.552
2
4201.4003
169.86964
5
848.55719
8
191.79052
3
0.0146405
2
0.2545869
1

Upper
95%
185302.5
629
16686.05
351
7173.217
546
38.07858
361
566.5972
758
71.10683
334
0.047438
449
0.202420
225

Lower
95.0%
52142.
7
13713.
6
4201.4
169.87
848.55
7
191.79
1
0.0146
4
0.2545
9

Upper
95.0%
185302
.6
16686.
05
7173.2
18
38.078
58
566.59
73
71.106
83
0.0474
38
0.2024
2

Calculated

Critical

7.031468

at 5% and D.F=7 is 14.0671.

Compare it with

at 1-5% =0.95 and D.F =7 ,

2.16735

Since 7.0356 is greater than 2.16735 then we accept the null hypothesis that
there is no

3.3

AUTOCORRELATION:

We will test the model for autocorrelation using the following

methods:-

A- The Graphical Method(time sequence plot):

After plotting the residuals

against time we get the following

graph :

The scatter shows that residuals

dont seem to be randomly

distributed , instead they exhibit a distinct behavior, they start

with positive then turn to negative then turn to positive again and
finally they become negative . so we conclude from this graph that
the successive residuals are positively correlated which suggest a
positive autocorrelation .

B- Durbin Watson d test:

To conduct this test we need first to calculate sum of squared differences in

successive residuals to the RSS:

Residuals(
et)
93.382825
1
211.40551
5
191.60393
5
137.00426
6
125.79709
2
42.825598
2

et-1
93.382
8
211.40
6
191.60
4
137.00
4

30.229683
71
194.76399
63

125.79
71
42.825
6
30.229
68

81.897426
24
98.163844
04
184.02099
76

194.76
4
81.897
43
98.163
84

130.73675
02
43.860492
9

184.02
1

11.644777
19
25.450901
89
31.658248
3
127.12973
8
39.892848
9
118.05793
11
81.999933
2

d=etet-1

130.73
68
43.860
5
11.644
78
25.450
9
31.658
2
-127.13
39.892
8
118.05
79

et^2

et*et-1

8720.3
52

118.02
3

13929.
36

44692.
29

19741.
64

19.801
58

392.10
26

36712.
07

40506.
13

54.599
67

2981.1
24

18770.
17

262.80
14
168.62
3

69064.
55

15824.
91

28433.
61

1834.0
32

26250.
56
17234.
7
5387.3
4

73.055
28
164.53
43
112.86
7
16.266
42
85.857
15
53.284
2
174.59
7

5337.0
74
27071.
54

913.83
38
37933.
01

-1294.6
5887.6
54

12738.
86
264.59
63
7371.4
51

6707.1
88
9636.1
4
33863.
73

15950.
67
8039.3
66
18064.
21

2839.2
11

17092.
1

30484.
2

1923.7
43

55.505
27
13.806
12
57.109
2
95.471
5

3080.8
35
190.60
91

135.60
08
647.74
84

3261.4
55

1002.2
45

24058.
31
5734.1
8
510.74
6
296.37
01
805.73
1

9114.8
05

16161.
97

4024.7
05

87.236
89

7610.2
75

1591.4
39

157.95
08
200.05
8

24948.
45

13937.
68

40023.
15
289137
.3

6723.9
89
274824
.2

5071.5
67
4709.6
7
9680.7
4

D^2

1.052081

Which means there is positive autocorrelation.

Decision:
Since

Conclusion:

which means no decision.

1- In the multiple regression model we concluded that the entire model

is significant .however after testing the partial individual hypothesis
we found out that two slop coefficient are statistically insignificant,
which were oil prices coefficient and I(%) coefficient.
2- In the double log model we concluded that only one slope coefficient is
statistically significant which M2.
3- In the semi log model we concluded that on average GDP of Bahrain
had been increasing at the instantaneous rate of growth of 4.75% and
at the compound rate of growth of 4.87% per year.
4- In the linear trend model we found out that there is an upward trend in
GDP of Bahrain .
5- In the inverse model we compared its
concluded that since MLRs

with the one of MLR and we

is higher then MLR is a better estimate

to the PRF of GDP.

6- After testing the model for Multicollinearity , in the first test we found out that a
serious collinearity problems exists between oil prices and M2 so we concluded that its
better to eliminate oil prices from the model. However after further testing we found out
that Multicollinearity is not considered a problem for all explanatory variables.
7- After conducting 4 different test of Heteroscedasticity on the model we found out that no
Heteroscedasticity exists in the mode .
8- Finally we tested the model for autocorrelation using two , in graphical test we saw that
there is a positive autocorrelation , however after further testing we couldnt decide
whether there is an autocorrelation or not.

Under the supervision of:

Dr.Ebrahim Hassan Al-Eize

Done by:
Duaa Hassan Ali Al-Aradi

20070986

sec.4

Mohammed Hassan Humidan 20063019

sec. 1

Mohammed Abdulwahid juma 20053272

sec. 1

Hussain Saleh Isa

20073884

sec. 1