IMPACT OF SOME VARIABLES ON

VIETNAM’S GDP

Students:
Nguyen Thi Diep Anh 1604040013
Vo Thi Trinh 1604040119
Ha Linh Trang 1604040112
Nguyen Thi Ngoc Bich 1604040017

Course: ECONOMETRICS
Lecturer: Nguyen Dinh Du
Tut: 3
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 TABLE OF CONTENTS

I. INTRODUCTION ...................................................................................................... 1
II. LITERATURE REVIEW .............................................................................................. 1
II. METHODOLOGY ................................................................................................ 3
III. ANALYSIS AND RESULTS ............................................................................... 5
1. Descriptive Statistics .......................................................................................... 5
1.1 Key statistics ................................................................................................ 5
1.2 Graph .............................................................................................................. 6
2. Model Analysis and Results ............................................................................... 7
2.1 Relevant tests .............................................................................................. 7
2.2 Error-checking tests ....................................................................................... 10
3. Estimated parameters ....................................................................................... 14
4. Overall fitness.................................................................................................. 15
5. Practical implications of the model .................................................................. 15
IV. SUMMARY AND CONCLUSION ............................................................................. 15
1. Limitations ....................................................................................................... 15
2. Conclusion and recommendations .................................................................. 16

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 TABLE OF FIGURE

Figure 1: Covariance and Correlation ................................................................................................ 5

Figure 1: Histograms of key statistics summary of GDP, CAP and EXP ........................................... 6

Figure 3: Relationship between GDP, CAP, EXP .............................................................................. 6

Figure 4: Testing individual partial coefficient .................................................................................. 7

Figure 5: Testing restriction on variables (adding Exp) ..................................................................... 8

Figure 6: Testing functional form..................................................................................................... 9

Figure 7: Testing structural stability .................................................................................................. 10

Figure 8: VIF .................................................................................................................................... 11

Figure 9: Intercorrelation .................................................................................................................. 11

Figure 10: Auxiliary regression ......................................................................................................... 11

Figure 11: Park test ........................................................................................................................... 12

Figure 12: White test ........................................................................................................................ 12

Figure 13: BG ................................................................................................................................... 14

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 I. INTRODUCTION

The gross domestic product or GDP (Domestic Product) is the value calculated by the sum of all final
products and services produced within a territory within a certain period of time, usually a year. GDP is
a measure of the value of national economic activity. Investment: in macroeconomics, only capital
increase in order to enhance future production capacity. Exports: are goods produced in domestic sales
to foreign countries (the amount of money earned from selling goods and services abroad - increasing
GDP). Imports: are goods produced abroad, but purchased to serve domestic needs (quantity Foreign
investment is due to the purchase of goods and services - reducing GDP

Gross domestic product (GDP) is a fundamental indicator reflecting economic growth, economic size,
per capita economic development level, economic structure and changes in prices of a country.
Therefore, GDP is an important and appropriate tool commonly used around the world to examine the
development and change in the national economy. Accurate awareness and rational use of this indicator
have important implications in surveying and evaluating sustainable development, smooth and
comprehensive economy. Any country wants to maintain a growth economy along with the stability of
money and jobs for the population that GDP is one of the specific signals for government efforts.
Therefore, studying the trend of GDP growth, the factors affecting GDP can help the government change
policies to achieve the objectives to promote economic growth. These are macro issues that everyone
operating in the economic sector is interested in. That's why our team decided to study the topic: "Some
factor in particular of capital and export contributing to affect Vietnam's gross domestic product (GDP)
in the period of 1986-2017”.

II. LITERATURE REVIEW

GDP is the total market value of all the final goods and services produced in a country in a given period.
The basic factors affecting GDP growth include the following key factors:

Firstly, human resources. Some view that people are the core of economic growth. People who are
healthy, intellectual, skilled, enthusiastic, motivated, enthusiastic and well-organized will be the basic
factors of economic growth.

Second, investment capital. In order to produce goods, to buy machinery and equipment, to expand
production scale, improve skills for employees, we need capital investment. Harod Domar raised the

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relationship between investment and economic growth with the ICOR formula, which is the rate of
investment increase divided by the rate of GDP growth.

Third, natural resources. Countries with abundant natural resources will be favorable conditions for
economic development. Not only can it be exploited and put into production, but it can also serve export
and purchase necessary goods.

Fourth, technology knowledge. Science and technology has always been the magic key to open the gate
to an outstanding economic growth. Science and technology helps increase productivity and production
efficiency, which can lead to a sudden increase in output.

Fifth, net exports. We live in an open economy, participating in the world economy and having relations
with other countries through trade and finance. We export the cheapest manufactured goods and services
in the country and import the goods that other countries have a cost advantage. The difference between
exports and imports is net exports. Exports have a direct impact on economic growth, as it is a part of
manufactured goods and services. Increased net exports will boost production of more products.

However, in all of these factors, the most mentioned concern is still investment and net exports (exports
and imports). Because these two factors are most affected by economic policies, and also because these
two factors are easy to statistics with more accurate data, there is often a discussion about the two-factor
policies. Due to the current nature of these two factors, we decided to include investment, export and
import into the model, studying their relationship with the economic growth of the group. Thereby, we
can see the correlation, the specific impact of these factors on economic growth.

In this report, we will use 4 kinds of test, they are T-test, F-test, Chow test and MWD test. T-test is used
for analysing two population means through statistical evidences. Two small sample sizes, taken from
the normal distributed population, are used to test the differences when variances are not known. T-
statistic and t-distribution also needed to determine the probability of the differences. F-test often used
when comparing statistical models in order to find the best one for a data set. Based on the procedure,
we have methods of deciding whether a variable should be added to a model in order to get highest
adjusted R-squared.

In a regression model with time series data, a structural change (values of parameters of model change
through time) may occur between the regressand Y and the regressors. The cause of that may be because

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of external forces, policy adjustments or government actions, and to see whether structural change has
happened, the Chow test is used to resolve that question. While we use functional form MWD test to
determine the choice between a linear regression model and a log-linear regression model.

Furthermore, for error-checking tests, 3 more kinds will be analysed. Firstly, we use auxiliary regression
to detect multicollinearity and also VIF method since some researchers believe that is an indicator of
multicollinearity. The higher the value, the more collinear the variable. Secondly, Park test and White
test are used for finding heteroscedasticity, with White standardized error test taken for remedial
measures as they can give true parameter values. And finally, Durbin-Watson and Breusch-Godfrey
(BG) test are used for testing autocorrelation to make sure Cov (𝐮𝐢,𝐮𝐣 |𝐗 𝐢 , 𝐗 𝐣 ) = 0.

Our research offers only a partial image of the whole picture, because it is well-known that there are
many other significant factors which influence the levels of stock market or production.

II. METHODOLOGY

Regression Model

GDP can mirror the reflecting economic growth, economic size, per capita economic development level,
economic structure and changes in prices of a country. For this reason, we want to observe the
relationship between the Vietnamese GDP and the capital in the period from 1986 to 2017. Firstly, our
assumed model is:
̂𝟏 + 𝛃
GDP = 𝛃 ̂𝟐 Cap + 𝐮
̂

̂𝟐
We expected that an increase in capital will result a growth in GDP; therefore, the coefficient 𝛃
should be positive.
̂𝟐 has positive sign.
Besides, the variable export usually go in same directions which means 𝛃
̂𝟏 + 𝛃
GDP= 𝛃 ̂𝟐 Cap + 𝛃
̂𝟑 Exp + 𝐮
̂

All dependent GDP and independent variables (Cap, Exp) in our model are measured in percentage so
̂𝟐 percentage
log-log model could be suitable. Specifically, a percentage change in Cap will lead to 𝛃
̂𝟐
change in GDP, holding others constant. Similarly, a percentage change in Exp will lead to 𝛃
percentage change in GDP, holding others constant.

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Since we want to test whether capital has significant effect on GDP Index, we would like to conduct t
test for individual partial coefficient 𝛃𝟐 :
H0: 𝛃𝟐 = 0 H 1: 𝛃𝟐 ≠ 0
We conduct F test to check whether we should add the variable export into our model or not. The
hypothesis is:
H0: 𝛃𝟑 = 0 ; H1: 𝛃𝟑 ≠ 0
Then, we want to test whether all variables have no effect on GDP, or at least one variable has the effect.
Therefore, we would like to conduct the F test for overall significance, also a test to support the decision
to add i3 into our model.
H0: 𝛃𝟐 = 𝛃𝟑 = 0 H1: 𝛃𝟐 ≠ 0 or 𝛃𝟑 ≠ 0
We conduct the Chow test to test the stability of parameters in our model over time, taking the 2017 as
the break point to test the structural change of natural GDP before and after this period; therefore, future
analysis of different break points should generate other dummy variables to test structural change with
the same method that we have used above. Therefore, our final model becomes as:
̂𝟏 + 𝛃
GDP = 𝛃 ̂𝟐 Cap + 𝛃
̂𝟑 Exp +𝛃
̂𝟒 Dummy + 𝐮
̂
Dummy = 1 for the period for the period after 2008;
Dummy = 0, otherwise (for the period before 2008)
H0: There is no structural change. H1: There is a structural change.
The 10th regression function assumption is stated that: There exists no perfect multicollinearity among
independent variables. If multicollinearity exists, it causes larger variances, wider confidence interval,
or less accuracy in model interpretation. To test whether 2 independent variables in our model Cap and
Exp exist linear relationship, we would like to use Variance – inflation factor (VIF) and intercorrelation
matrix methods (using Eviews). Multicollinearity exists if VIF is greater than 10 or correlation of a pair
of variables is approximately 1.
H0: No multicollinearity . H1: Multicollinearity exists
Another important assumption for multiple OLS estimators is that the variance of error term is constant
(𝛔𝟐 (𝐮𝐢 ) = 𝛔𝟐 ). The heteroskedasticity error (𝛔𝟐 (𝐮𝐢 ) = 𝛔𝐢 𝟐 ) in the model causes the variance of estimator
(𝛔𝟐 (𝛃̂𝐢 )) not minimized and the t-test, F-test not reliable. In order to test for heteroskedasticity error in
the final model, we use Park test and White test with cross term through E-Views.
H0: Homoskedasticity (var (𝐮𝐢 ) = 𝛔𝟐 ); H1: Heteroskedasticity (var (𝐮𝐢 ) ≠ 𝛔𝟐
The last error-checking test we would like to conduct is autocorrelation test which is related to
Assumption 5 of regression function: “No autocorrelation between the disturbances” or Cov
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(𝐮𝐢,𝐮𝐣 |𝐗 𝐢 , 𝐗 𝐣 ) = 0. The consequence of autocorrelation is that although the OLS estimators are still
unbiased, their variances are no longer the minimum, therefore may not be BLUE. Durbin-Watson test
and the Breusch-Godfrey test (BG test) are carried out.
H0: 𝝆 = 0 (No autocorrelation); H1: 𝝆 > 0 (Positive autocorrelation).

III. ANALYSIS AND RESULTS

1. Descriptive Statistics
1.1 Key statistics

Using E-Views, we obtain the key descriptive statistics for each variable in our final model: the
dependent variable GDP Index, and the independent variables that are index of Capital and Export.

Figure 1: Covariance and Correlation

From the covariance matrix, it can be clearly seen that the variance of GDP is 3.67E+21 while its
covariance with capital and export is 1.1E+21 and 3.83E+21, respectively. The positive number in each
cell of covariance matrix represents a positive relationship between two corresponding variables. In order
to see the strength of relationship among three variables, the correlation matrix is also constructed. For
instance, the positive relationship between GDP and capital is quite strong, since the correlation between
these two variables is relatively high, at 0.860468.

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10 12
Series: CAPITAL__CURRENT_USD_ 20 Series: GDP_CURRENT_US$_
Sample 1986 2017 Series: EXPORT__USD_
10 Sample 1986 2017
8 Sample 1986 2017
Observations 32 Observations 32
16 Observations 32
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6 Mean 2.06e+10 Mean 5.21e+10 Mean 6.39e+10
Median 1.09e+10 12 Median 1.86e+10 Median 3.39e+10
6
Maximum 5.95e+10 Maximum 2.27e+11 Maximum 2.05e+11
4
Minimum 8.13e+08 Minimum 1.00e+09 Minimum 6.29e+09
8 4
Std. Dev. 1.92e+10 Std. Dev. 6.50e+10 Std. Dev. 6.15e+10
2 Skewness 0.681501 Skewness 1.308656 Skewness 1.106498
Kurtosis 1.934603 4
Kurtosis 3.489104 2 Kurtosis 2.836586
0
Jarque-Bera 9.452728
50000.0 1.0e+10 2.0e+10 3.0e+10 4.0e+10 5.0e+10 6.0e+10 Jarque-Bera 3.990462 0 Jarque-Bera 6.565411
0 Probability 0.008859 250000. 5.0e+10 1.0e+11 1.5e+11 2.0e+11
Probability 0.135982 Probability 0.037527
250000. 5.0e+10 1.0e+11 1.5e+11 2.0e+11 2.5e+11

Figure 2: Histograms of key statistics summary of GDP, CAP and EXP

It can be seen that, for example, the mean value of GDP Index is 6.39E+10, with a relatively high
standard deviation of 6.15E+10. On the other hand, the mean index of capital is 2.06E+10, and its
standard deviation is 1.92E+10. Concerning the export, the mean annualized rate of 5.21E+10, with the
standard deviation of 6.50E+10.

Using E-Views, we obtain the key descriptive statistics for each variable in our final model: the
dependent variable GDP Index, and the independent variables that are index of capital, and export

1.2 Graph
2.4E+11

2.0E+11

1.6E+11

Capital (current USD) 1.2E+11

export( USD)

8.0E+10

4.0E+10

0.0E+00
0.0E+00 8.0E+10 1.6E+11 2.4E+11

GDP(current US$)

Figure 3: Relationship between GDP, CAP, EXP

We can clearly see from the graphs that there were positive relationships between other independent
variables and GDP from 1986 to 2017. Index of export showed stronger positive relationship with GDP
index than capital; therefore, we expect higher positive coefficient of export index. It is also noticeable
to see that when export index was high, between 2.0E+11 and 2.4E+11, stock index appeared to be more
sensitive and showed remarkable high figures.

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 2. Model Analysis and Results
2.1 Relevant tests

Since we want to observe the relationship between Vietnamese and the capital in the period from 1986
to 2017, firstly our assumed model is:

̂𝟏 + 𝛃
GDP = 𝛃 ̂𝟐 Cap + 𝐮
̂

GDP is Vietnam’s GDP ($); Cap is the capital, and 𝐮

̂ is the error term.

a. Testing individual partial coefficient

Figure 4: Testing individual partial coefficient

H0: 𝛃𝟐 = 0; H1: 𝛃𝟐 ≠ 0
𝛃̂ − 𝟎
t* = 𝐒𝐞𝟐(𝛃̂ ) =
𝟑.𝟏𝟏𝟔−𝟎
= 22.09; 𝐭 𝐜𝟐.𝟓%,𝟑𝟎 = 2.042
𝟐 𝟎.𝟏𝟒𝟏

Because |t-stat| > 𝐭 𝐜  Reject H0.

Conclusion: There is enough statistical evidence to conclude that the variable capital has an effect on
GDP at 5% level of significance.

b. Testing restriction on variables (add or drop)

Original model After adding Exp into the model

̂𝟏 + 𝛃
GDP = 𝛃 ̂𝟐 Cap + ̂
𝐮 ̂𝟏 + 𝛃
GDP = 𝛃 ̂𝟐 Cap + 𝛃
̂𝟑 Exp + ̂
𝐮
(R2 =0.9417; k = 2; n = 32) (R2 =0.9852 ; k = 3; n =32)

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 Figure 5: Testing restriction on variables (adding Exp)

H0: 𝛃𝟑 = 0; H1: 𝛃𝟑 ≠ 0
(𝐑𝟐𝐔𝐑 − 𝐑𝟐𝐑 )⁄(𝐤𝐔𝐑 − 𝐤𝐑 ) (𝟎.𝟗𝟖𝟓𝟐−𝟎.𝟗𝟒𝟏𝟕)⁄𝟏 𝐜
F-stat = (𝟏− 𝐑𝟐𝐔𝐑 )⁄(𝐧− 𝐤𝐔𝐑 )
= (𝟏−𝟎.𝟗𝟖𝟓𝟐)⁄(𝟑𝟐−𝟑) = 3808.6; 𝐅𝟓%,𝟏,𝟐𝟗 = 4.2

Because F-stat > Fc  Reject H0

Conclusion: There is enough statistical evidence to conclude that the variable export should be addedinto
the model at 5% level of significance.

 Therefore, our model is changed into:

̂𝟏 + 𝛃
GDP= 𝛃 ̂𝟐 Cap + 𝛃
̂𝟑 Exp + 𝐮
̂

c. Testing the functional form of regression model

Log-
Log-lin lin
Lin-lin
môm
odel

Lin-log Log-log

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 Figure 6: Testing functional form
H0: 𝛃𝟐 = 𝛃𝟑 = 0; H1: 𝛃𝟐 ≠ 0 or 𝛃𝟑 ≠ 0
𝐑𝟐 ⁄(𝐤−𝟏) 𝐜
𝟎.𝟗𝟖𝟓𝟐 ⁄(𝟑−𝟏)
F-stat = (𝟏− 𝐑𝟐 )⁄(𝐧−𝐤) = (𝟏−𝟎.𝟗𝟖𝟓𝟐)⁄(𝟑𝟐−𝟑) = 965.229; 𝐅𝟓%,𝟐,𝟐𝟗 = 3.34

Because F-stat > FC  Reject H0

Conclusion: There is enough statistical evidence to conclude that at least one variable (capital or export)
has the effect on GDP at 5% level of significance.

We run OLS on lin-lin, log-lin, lin-log, log-log model, respectively to obtain the CV and adjusted 𝐑𝟐 of
the models:

𝐂𝐕𝐥𝐢𝐧−𝐥𝐢𝐧 = 𝐂𝐕𝐥𝐨𝐠−𝐥𝐢𝐧 = 0.0137 𝐂𝐕𝐥𝐢𝐧−𝐥𝐨𝐠 = 𝐂𝐕𝐥𝐨𝐠−𝐥𝐨𝐠 = 0.179

1.54*𝟏𝟎−𝟏𝟏 ̅̅̅̅
𝐑𝟐 𝐥𝐨𝐠−𝐥𝐢𝐧 = 0.882 1.97*𝟏𝟎−𝟏𝟐 ̅̅̅̅
𝐑𝟐 𝐥𝐨𝐠−𝐥𝐨𝐠 = 0.854
̅̅̅̅
𝐑𝟐 𝐥𝐢𝐧−𝐥𝐢𝐧 = 0.984 ̅̅̅̅
𝐑𝟐 𝐥𝐢𝐧−𝐥𝐨𝐠 = 0.705

As the lin-lin model has the lowest CV and the highest adjusted 𝐑𝟐 , we choose lin-lin model to be the
most suitable model for interpretation:

 Therefore, our model is changed into:

̂𝟏 + 𝛃
GDP = 𝛃 ̂𝟐 Cap + 𝛃
̂𝟑 Exp + 𝐮
̂

d. Testing structural stability (Chow test)

We generate a dummy variable with the series:

Dummy= @recode(series01>=2008,1,0), meaning that:
Dummy = 1 for the period after 2008;
Dummy = 0, otherwise (for the period before 2008).
Then we add this dummy variable to our lin-lin model. Our model becomes:
̂𝟏 + 𝛃
GDP = 𝛃 ̂𝟐 Cap + 𝛃
̂𝟑 Exp +𝛃
̂𝟒 Dummy + 𝐮
̂

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 Figure 7: Testing structural stability

H0: 𝛃𝟒 = 0 (There is no structural change); H1: 𝛃𝟒 ≠ 0 (There is a structural change)

𝛃̂ −𝟎
𝐭 𝛃̂𝟑 = 𝐒𝐞𝟑(𝛃̂ ) =
𝟏.𝟕𝟕𝐄+𝟏𝟎−𝟎
= 2.908; 𝐭 𝐜𝟐.𝟓%,𝟐𝟖 = 2.048 (k = 4)
𝟑 𝟔.𝟎𝟖𝑬+𝟗

Because |𝐭 𝛃̂𝟑 | > 𝐭 𝐜  Reject H0

Conclusion: There is enough statistical evidence to conclude that there is a structural change in the
sample in 2007 at 5% level of significance.
In our time – series model, we add the dummy variable with the break point of 2007 to test the structural
change of natural GDP before and after this period; therefore, future analysis of different break points
should generate other dummy variables to test structural change with the same method that we have used
above. Therefore, after several relevant tests, our final model is chosen as:
̂𝟏 + 𝛃
GDP =𝛃 ̂𝟐 Cap + 𝛃
̂𝟑 Exp + 𝐮
̂

2.2 Error-checking tests

Multicollinearity
Firstly, we run the auxiliary regression on our independent variables:
̂𝟏 + 𝛃
Cap = 𝛃 ̂𝟐 Exp + 𝐮
̂

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 VIF method Intercorrelation matrix method

Since our model is intercept-present, we use We obtain that: 𝝆𝐥𝐧(𝐢𝐩),𝐥𝐧(𝐢𝟑) = 0.9579

the cenetred VIF, not the uncentered one. The  0.9 < 𝝆𝐥𝐧(𝐢𝐩),𝐥𝐧(𝐢𝟑) < 1
centered VIF obtained equals 1.  There is a probability of imperfect
Since VIF < 10 multicollinearity.
 No multicollinearity exists.
We see that VIF method concludes that no multicollinearity exists whereas the intercorrelation matrix
represents a probability of multicollinearity between Capital and Export. Therefore, we take an
additional step as following:

Figure 8: VIF Figure 9: Intercorrelation matrix

According to Klein’s rule of thumb (Gujarati, 2003), “Multicollinearity may be a troublesome problem
only if the R2 obtained from an auxiliary regression is greater than the overall R 2, that is, that obtained
from the regression of Y on all the regressors”. We see that: Overall R2 = 0.9189 while R2 obtained from
the auxiliary regression is 0.9149, little smaller than the overall R2. Therefore, although there may exists
multicollinearity in our final model, it is not a “troublesome problem” according to Klein’s rule of thumb.
As a result, we decide not to remedy the multicollinearity error in our final model.

Figure 10: Auxiliary regression

Heteroskedasticity
 Park test:

- ̂𝟏 + 𝛃
Estimate: GDP = 𝛃 ̂𝟐 Cap + 𝛃
̂𝟑 Exp + ̂
𝐮  Obtain ̂
𝐮

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 Figure 11: Park test

H0: Homoskedasticity (var (𝐮𝐢 ) = 𝛔𝟐 ); H1: Heteroskedasticity (var (𝐮𝐢 ) ≠ 𝛔𝟐 )

̂𝟏 ′ + 𝛃
̂𝟐) = 𝛃 ̂𝟐 ′ ln(Cap) + 𝐮̂′ ̂ 𝟐 ) = 𝛃̂ ̂ ̂′′
Estimate: ln(𝐮 Estimate: ln(𝐮 𝟏 ′′ + 𝛃𝟐 ′′ ln(Exp) + 𝐮

|𝐭 𝛃̂𝟐 ′ | (0.4309) < 𝐭 𝐜 (2.042)  Reject H0 |𝐭 𝛃̂𝟏 ′′ | (0.3805) < 𝐭 𝐜 (2.042)  Reject H0

 No exist Heteroskedasticity in both variables (CAP and EXP).

 White test (with cross term):

- ̂𝟏 + 𝛃
Estimate: GDP = 𝛃 ̂𝟐 Cap + 𝛃
̂𝟑 Exp + 𝐮
̂  Obtain 𝐮
̂

- ̂" + 𝛃
̂𝟐 = = 𝛃
Estimate: 𝐮 ̂" cap + 𝛃
̂" exp+ 𝛃
̂" 𝐜𝐚𝐩𝟐 + 𝛃
̂" 𝐞𝐱𝐩𝟐 + 𝛃
̂" cap exp + 𝛄̂
𝟏 𝟐 𝟑 𝟒 𝟓 𝟔

Figure 12: White test

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 H0: Homoskedasticity (var (𝐮𝐢 ) = 𝛔𝟐 ); H1: Heteroskedasticity (var (𝐮𝐢 ) ≠ 𝛔𝟐 )

White-stat = n*𝐑𝟐 = 32 * 0.223807 = 10.86035; 𝝌𝟐 0.05,6 = 12.5916

Because White – statistics < 𝝌𝟐 0.05,4  NOT reject H0  No exist Heteroskedasticity.

As a result of both test, there is nonexistence of Heteroskedasticity

We can see from the model that the White standardized error method has changed the original standard
error of the estimators from 0.2521 (Cap) and 0.0743 (Exp) to 1.72E+10 and 8.00E+9respectively, both
are larger than the original ones. However, as Damodar stated in his book, White’s heteroscedasticity-
corrected standard errors can be larger or smaller than the uncorrected standard errors.

 Autocorrelation

 Durbin-Watson test:

From Durbin-Watson test, we obtain that the DW statistic is d* = 0.9928. As 0 < d* < 2, we suspect that
there may exists a positive autocorrelation in our model.
H0: 𝝆 = 0 (No autocorrelation); H1: 𝝆 > 0 (Positive autocorrelation).
d* = 0.9928
We have: k’ = 2 (because there are 2 independent variables); n = 32; 𝛂 = 5%
 𝐝𝐋 ≈ 1.748; 𝐝𝐔 ≈ 1.789 (for n = 32)

Since d* < 𝐝𝐋  Reject H0

Conclusion: There is enough statistical evidence to conclude that there exists a positive (first-order)
autocorrelation in our final model at 5% level of significance.
 BG test:

We obtain that the DW statistic is d* = 0.9928. As 0 < d* < 2, we suspect that there may exists a positive
autocorrelation in our model.
H0: There is no autocorrelation at up to 2 lags
H1: There exists autocorrelation at up to 2 lags.
BG-stat = nR2 = 32 x 0.3398 = 10.8746
𝝌𝟐𝟎.𝟎𝟓,𝟐 = 5.99147
Since BG-stat > 𝝌𝟐𝟎.𝟎𝟓,𝟐  Reject H0

13
Conclusion: There is enough statistical evidence to conclude that there exists second-order
autocorrelation in our final model at 5% level of significance.

Figure 13: BG test

3. Estimated parameters

The GDP and two independent variables data and their explanation are presented in table below. All the
variables including GDP are all annual data collected from database in
“https://data.worldbank.org/country/vietnam?locale=vi”

Variables Definition of variables

GDP GDP

Cap The capital

Exp The export

Dummy variable indicates different periods of time;

D
D = 1 if after 2008; D = 0 otherwise

Since these variables are all related to economy and finance, we are interested in how the change in
GDP related to the change in capital and export.

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 ̂𝟐 (0.87) in our
There is a positive relationship between change of GDP and Capital. The coefficient 𝛃
final model indicates that when Capital increased by $1, Vietnam’ GDP increased by $0.87, holding
other variables constant.
 ̂𝟑 (0.688) in our
There is positive relationship between change of GDP and Export. The coefficient 𝛃
final model indicates that when Export increased by $1,GDP increased by 0.688 holding other variables
constant.
 The t-statistic of both independent variables from the final model shows remarkably high values which
represent the significance of the estimated parameters (Capital and Export).

The data period is from 1986 to June 2017, which is the total of 32 observations. We split the sample
into two periods, taking 2008 as the break point to test structural change as we observed that there was
a financial recession in America, which spread to other countries including Vietnam. We construct
structural change test on Dummy variable, which represents the two sub-periods, and reach the
conclusion that GDP is not stationary before and after 2008 crisis.
4. Overall fitness

We obtain R2 = 0.9852, meaning that approximately 98.52% of the variation in the dependent variable
GDP is explained by the joint variation in the independent variables (capital and export).

5. Practical implications of the model

This study aims to discover the impact of Capital and Export on Vietnam’s GDP between 1986 and
2007. The study concludes that the change of GDP resulted from the change in Capital and Export in
positive ways. One implication is that the growth rate of capital and export could be useful in forecasting
the direction and relative level of GDP. The potential explanation is increased. This model can also be
used to test for the hypothesis of structural change in the GDP due to period shift in the economic
variables.

IV. SUMMARY AND CONCLUSION

1. Limitations

Although we put in much effort with the knowledge of econometrics and financial subject, we still cannot
develop the research to its full potential. Firstly, we only identify the determinants import and export
while in fact, there are others important factors that affect the GDP in Vietnam. Some more variables
can be included in the model so that the suitability of the model increases, but doing so will be more

15
complicated, more defects causing difficulties in testing. Secondly, we also have some conclusion in the
tests of the regression model that are unexplained thoroughly. For example, in our test for the
multicollinearity, there is conflicting results of VIF and intercorrelation method of whether
multicollinearity exists in the final model.

2. Conclusion and recommendations

In conclusion, the total value of investment, export and import capital affects Vietnam's gross domestic
product during the period 1986 – 2017. From the result obtained, the economic implication of the positive
relationship among Capital, Export and GDP is acknowledged as when index Capital and Export
increases, the Vietnam’s GDP will also increase. The model selected is consistent with economic theory.

In order to increase GDP in a country, it is necessary to strengthen the implementation of policies to

attract investment capital, increase exports and limit imports.

To attach importance to attracting multinational corporations to invest in big projects, high technologies
and infrastructure, creating a transformation in restructuring, promoting industries to support and create
conditions for domestic enterprises to distribute development.

To enhance exports and restrict imports:

At the state level, there is a socio-political stability, a good international relationship, a clear, transparent
and stable legal framework; quick operating mechanism, policy mechanism, reasonable macro
management tools, including bank interest rates, exchange rates have the effect of promoting exports
and restricting imports.

At the enterprise level, there is the ability to constantly improve the efficiency of production and
business, quickly grasp the situation of supply - demand (both quantity and quality) in the world market
both production and business. The items and types of services, the competitiveness is shown firstly at
low prices, high quality, designs and packaging in accordance with consumer tastes.

16
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