Impact of National Reserve, Remittance and Foreign

Direct Investment on GDP growth of Germany

5/23/2018
 Report on

Impact of National Reserve, Remittance and Foreign Direct

Investment on GDP growth of Germany

Prepared for

Mr. Ratul Kumar Saha

Course Instructor

BUS 503: Econometrics

Prepared by

Rezaul Karim ID: 1266

Anik Hassan Rubel ID: 1261

Rakib Hassan Tushar ID: 1262

MBA Program- 21st Batch

Date of Submission

May 23, 2018

Institute of Business Administration

Jahangiranagar University
 Executive Summary

The main focus of this study is to determine the impact of National Reserve (RES), Remittance (REM) and
Foreign Direct Investment (FDI) on GDP of Germany from 1971-2016. All the values of the variables are
in the current Dollar price but the value of GDP is undertaken as Constant 2010 price. To determine
whether the time series data considered for this study is stationary, Correlogram and Unit root test
(Augmented Dicky-Fuller Test) has been conducted.

The results of the tests show that data of all variables become stationary at 1st difference. A Co-
integration test, named as Johansen Co-integration test is also conducted which shows that there is two
co-integration and a long term relationship among the selected variables according to the Eigen value
statistics and Prob. value. Moreover, a Granger Causality test on these four variables provides that there
is no causal relationship among those variables in the long run.

Lastly, regression analysis is used to identify the impacts of FDI, RES and REM on GDP. The results of
regression model reveals that any change in the independent variables can affect the dependent
variable where Remittance can affect the GDP most and FDI at the second in terms of affecting GDP.

(I)
Table of Contents
Executive Summary.......................................................................................................................... (I)

Introduction ......................................................................................................................................1
The objective of the report ....................................................................................................................... 1
Methodology............................................................................................................................................. 2
Econometric Methodology ....................................................................................................................... 2
Limitations of the report: .......................................................................................................................... 3

Literature Review ..............................................................................................................................4

Test Results and Discussion ................................................................................................................5

Correlogram and Autocorrelation Function: ............................................................................................ 5
Augmented Dickey-Fuller Test (Unit Root Test): ...................................................................................... 7
Johansen test of co-integration: ............................................................................................................... 8
Granger Causality Test: ........................................................................................................................... 10
Regression Analysis: ................................................................................................................................ 11

Conclusion ....................................................................................................................................... 13
References .................................................................................................................................................. 14
Appendix ..................................................................................................................................................... 15

II
List of Tables

Table 1- Correlogram at the Level difference.

Table 2- Correlogram at the 1st difference.

Table 3- Unit Root Test (Augmented Dickey-Fuller Test)

Table 4- Unrestricted (Johansen) Co-integration Rank Test (Trace)

Table 5- Unrestricted Co-integration Rank Test (Maximum Eigenvalue)

Table 6- Granger-Causality test

Table 7- Regression Analysis

III
Introduction
This section presents the background of the report, “Impact of National Reserve, Remittance and
Foreign Direct Investment on GDP Growth of Germany” and outlines its objectives, scope, methodology,
and benefits of the study.

This report is prepared as the partial fulfillment of the course ‘Econometrics (BUS 503)’ assigned by our
course instructor, Mr. Ratul Kumar Saha, Lecturer, IBA-JU. The main objective of this group report is to
observe the impact of three independent variables on a dependent variable using a set of time series
data and applying the time series econometric models learned throughout the course.

The key points of this report will be-

 Finding stationarity of the data by Augmented Dickey-Fuller(ADF) test and Correlogram
 Checking the Co-integration between the variables by Johansen Cointegration test
 Identifying the causal relationship between two sets of time series using Granger Causality test
 Identifying the effect of the explanatory variables on the response variable.

The objective of the report

The main objective of the study is to examine the effect of certain macroeconomic factors l Foreign
Direct Investment rate (FDI), National Reserve (RES), and Personal Remittance Received (REM) on the
GDP of Germany. The research will be conducted based on secondary time series data. The tenure of the
data is from 1971-2016.

The study is concerned to analyze: -

 The Effect of FDI on GDP,

 The Effect of remittance on GDP and
 The Effect of Direct investment on GDP

All the analyses conducted from the perspective of the economy of Germany.

1
Methodology

This report is completely based on secondary data. The sources of the data included-

 Website of World Bank

 Different econometrics related publications
 Different journals and articles on the selected variables

Type of Research: The research type would be quantitative.

Sampling Type: The sampling plan of the research included data of Germany only.

A number of Sample Units: Sampling units consisting of the data of the year 1971-2016, 46 years yearly
data.

Approaches toward Data Analysis and Interpretation: The basis of the report was to construct by
econometrical analysis of time series data like correlogram, augmented dickey-fuller tests, Johansen Co-
integration test, Granger Causality test and Regression Analysis.

Data Analysis Tool: Microsoft Excel and E-views were used for analyzing the data.

Econometric Methodology
Regression equation for this report is as follows:

LGDPt = β0 + β1 FDI + β2 RES + β3 REM + ɛt

Where,

GDP = Gross Domestic Product Growth;

FDI = Foreign Direct Investment;

RES = National Reserve;

REM= Remittance Received;

ɛt = The error term in the model;

β0 represents the constant term in the model and

β1 β2 and β3 represent the respective parameters.

2
Time series data should be tested first to find out the stationary of the variables. We used Correlogram
and Augmented Dickey-Fuller (ADF) tests to check the stationarity of the variables. The general equation
of ADF test is,

After testing the variables for a unit root, the next step is to check the co-integration among the
variables. There are two types of Johansen test, either with a trace or with eigenvalue. The null
hypothesis for the trace test is the number of cointegration vectors, r ≤? The null hypothesis for the
eigenvalue test is r =? The Johansen test starts with estimating general VAR model. Optimal lag length is
selected based on the lag selection criteria.

Granger causality test is used to determine whether one-time series is significant in forecasting another.
This test is based on the following regressions:

Finally, the regression analysis is used for estimating the relationships among variables.

Limitations of the report:

The limitations faced while preparing the report are-

 Choosing the appropriate lag length was not an easy task.

 Data of 46 years was not sufficient to run such analysis and get a good forecast.

3
Literature Review

A number of findings of literature exist on finding the relationship between macroeconomic variables
such as Remittance, Foreign Exchange Reserve, FDI etc. and GDP. Most of the studies use time series
analysis to find out the relationship, co-integration, causality between the macroeconomic variables and
GDP.

Hassan & Shakur (2017) find that the growth effect of remittances is negative at first but becomes
positive at a later stage, evidence of a non-linear relationship with Per Capita GDP growth from the
context of Bangladesh. This suggests a U-shaped relationship between remittances and per capita GDP
growth. Bettin and Zazzazo (2008) say that remittances have contributed little to economic growth in
remittances-receiving economies and may have even retarded growth in some. They concluded that
they didn’t find a significant positive impact of remittances on long-term growth and often find a
negative relationship between remittances and growth.

Polterovich and Popov (2003) examined the relationship between foreign exchange reserves and long-
term rates of economic growth using standard growth regressions to show that policy-induced
accumulation of reserves matter for economic growth even when other factors are taken into
consideration. Regression results showed that the investment/GDP ratios and growth are linked, but
also suggested that reserve accumulation induces growth through greater involvement in the foreign
trade.

Abbas, Akbar, Nasir, Ullah, Naseem (2011) and Waqas Javaid (2016) show that there is a positive and
significant relationship between FDI and GDP. Like them, Zhang (2006), Kabir (2007), Mengistu & Adams
(2007), Agosin and Mayer (2000) and Lutz (2004) find that that foreign investment has a positive impact
on economic growth through improving exports. On the other hand, Nuzhat Falki (2009), Eller, Haiss &
Steiner (2005), Quazi (2004), and Rahman (2008) find a negative statically insignificant relationship
between FDI and GDP.

Literature supports that the investigation on the impact of inflation rate (INF), labor force growth (GLF)
and foreign direct investment (FDI) on GDP growth rate of Germany can be investigated. Accordingly,
there is some scope to see the impact of these three macroeconomic indicators on GDP of Germany and
so, this report is made.

4
Test Results and Discussion
Correlogram and Autocorrelation Function:
Correlogram is a graphical representation of Autocorrelation Function (ACF) to determine whether there
exists any stationary in the data of a particular variable in the long run. In this analysis, we used a lag
length of 15 out of 46 observations because a rule of thumb is to compute ACF up to one-third to one
quarter the length of the time series.

Sample: 1971 2016

Included observations: 46
Autocorrelation Partial Correlation AC PAC Q-Stat Prob
. |******* . |******* 1 0.933 0.933 42.730 0.000
. |******| .|. | 2 0.869 -0.017 80.594 0.000
. |******| .|. | 3 0.809 0.007 114.23 0.000
. |***** | .|. | 4 0.751 -0.026 143.87 0.000
. |***** | .*| . | 5 0.687 -0.074 169.28 0.000
. |***** | .|. | 6 0.624 -0.029 190.79 0.000
. |**** | .|. | 7 0.566 -0.002 208.95 0.000
. |**** | .|. | 8 0.515 0.013 224.36 0.000
. |*** | .*| . | 9 0.453 -0.107 236.64 0.000
. |*** | .|. | 10 0.392 -0.044 246.04 0.000
. |** | .|. | 11 0.331 -0.038 252.97 0.000
. |** | .|. | 12 0.273 -0.035 257.81 0.000
. |** | .|. | 13 0.213 -0.047 260.86 0.000
. |*. | .|. | 14 0.155 -0.033 262.53 0.000
. |*. | .*| . | 15 0.096 -0.067 263.18 0.000
Table 1- Correlogram of Germany GDP at a constant price in 2010 US$, 1971-2016 at the Level
difference.

The GDP correlogram up to 15 lags shows a random walk model portrayed in the figure below.

At Level including intercept and trend both, the ACF starts at a very high value at lag 1 (0.933) and
decreases very slowly. Thus it seems to be non-stationary. On the other hand, the autocorrelation
coefficient and partial autocorrelation coefficient (PAC) starts with a low value (0.049) at the first
difference and the data becomes stationary. In the similar fashion, we can find stationary of data of the

5
variables named as ‘RES’ and ‘REM’ but FDI has got its stationarity at its level base according to an
analysis by E-Views Software shown in the appendix.

Sample: 1971 2016

Included observations: 45
Autocorrelation Partial Correlation AC PAC Q-Stat Prob
.|. | .|. | 1 0.049 0.049 0.1172 0.732
***| . | ***| . | 2 -0.359 -0.362 6.4580 0.040
.*| . | .*| . | 3 -0.139 -0.112 7.4356 0.059
. |*. | .|. | 4 0.079 -0.045 7.7596 0.101
.|. | .*| . | 5 -0.046 -0.161 7.8735 0.163
. |*. | . |*. | 6 0.104 0.126 8.4632 0.206
.|. | .*| . | 7 0.005 -0.083 8.4648 0.293
.*| . | .|. | 8 -0.103 -0.055 9.0705 0.336
.*| . | .*| . | 9 -0.082 -0.067 9.4617 0.396
.|. | .|. | 10 0.073 -0.012 9.7822 0.460
.|. | .|. | 11 0.019 -0.036 9.8038 0.548
.|. | .|. | 12 -0.002 -0.012 9.8040 0.633
.|. | .*| . | 13 -0.055 -0.072 10.001 0.694
.*| . | .*| . | 14 -0.127 -0.163 11.095 0.679
.|. | .*| . | 15 -0.040 -0.074 11.209 0.738
Table 2- Correlogram of Germany GDP at a constant price in 2010 US$, 1971-2016 at the 1st difference.

6
Augmented Dickey-Fuller Test (Unit Root Test):

It is essential to confirm the order of integration of the variables first before testing co-integration
among the variables. As mentioned in the econometric methodology, we have used ADF to check the
stationary of the data series. The null hypothesis of ADF test is that the variable has a unit root. ADF test
is used to make the data stationary.

H0: Data has unit root i.e. series is non-stationary.

H1: The series doesn’t have unit root i.e. series is stationary.

Calculated values at Schwarz Info Criterion

Level 1st difference 1% 5% 10%

GDP 5.537302 -3.946077 -2.618579 -1.948495 -1.612135

FDI -3.190764 - -2.617364 -1.948313 -1.612229

None
RES 0.724765 -5.539281 -2.617364 -1.948313 -1.612229

REM 3.530853 -1.665253 -2.621185 -1.948886 -1.611932

GDP -0.376994 -6.418687 -3.592462 -2.931404 -2.603944

FDI -4.025417 - -3.584743 -2.928142 -2.602225

Intercept
RES -1.335038 -5.684916 -3.588509 -2.929734 -2.603064

REM 1.553082 -6.142802 -3.588509 -2.929734 -2.603064

GDP -2.663632 -6.329987 -4.186481 -3.518090 -3.189732

Trend & FDI -5.240141 - -4.175640 -3.513075 -3.186854

Intercept RES -2.018921 -5.617448 -4.180911 -3.515523 -3.188259

REM -0.676229 -6.680909 -4.180911 -3.515523 -3.188259

Table 3- Augmented Dickey-Fuller Test

7
From the eviews’ output we notice that the calculated t value (2.663632) of Augmented Dickey-Fuller
test for GDP is lower than the test critical values (4.175640), so we accept null hypothesis with
insignificance level of prob. Value (0.2559). From the test result, it is apparent that GDP is no stationary
in ‘Level’, Stationary was found testing ADF in the 1st difference (4.186481) of the variable including
intercept, trend & intercept, and none in the equation. As at each time for intercept, trend & intercept,
and none, the probability of non-stationary is less than 5%. Therefore the data is now stationary.
The result shows that except FDI, all the variables become stationary in 1st difference. FDI is stationary
in level with 0.0005 prob. value. And for the other variables (Reserve, & Remittance), they are stationary
in 1st difference.

Since all the variables became stationary after first difference, it is necessary to test if the variables were
cointegrated that is whether a long-run relationship exists between the variables. Hence it is important
to determine the optimum lag length required in the co-integration test.

Johansen test of co-integration:

Here 3 variables such as remittance received, total reserves and net inflows are given. We assume that
all the variables are non-stationary but when we convert them to first difference then they become
stationary. We must keep this in mind that to do Johansen test of co-integration the data must be non-
stationary and the data must be integrated of the same order. As all 3 of the variables here are non-
stationary so Johansen test can be applied here.
The total observation for this test is 44.
Unrestricted Co-integration Rank Test (Trace)
Hypothesized Trace 0.05
No. of CE(s) Eigenvalue Statistic Critical Value Prob.**
None 0.345508 36.83628 47.85613 0.3553
At most 1 0.236316 18.18484 29.79707 0.5524
At most 2 0.118742 6.322364 15.49471 0.6574
At most 3 0.017136 0.760532 3.841466 0.3832
Trace test indicates no cointegration at the 0.05 level
* denotes rejection of the hypothesis at the 0.05 level
**MacKinnon-Haug-Michelis (1999) p-values
Table 4- Unrestricted Co-integration Rank Test (Trace)

8
 Unrestricted Co-integration Rank Test (Maximum Eigenvalue)
Hypothesized Max-Eigen 0.05
No. of CE(s) Eigenvalue Statistic Critical Value Prob.**
None 0.345508 18.65144 27.58434 0.4419
At most 1 0.236316 11.86248 21.13162 0.5613
At most 2 0.118742 5.561832 14.26460 0.6698
At most 3 0.017136 0.760532 3.841466 0.3832
Max-eigenvalue test indicates no cointegration at the 0.05 level
* denotes rejection of the hypothesis at the 0.05 level
**MacKinnon-Haug-Michelis (1999) p-values
Table 5- Unrestricted Co-integration Rank Test (Maximum Eigenvalue)

Here,
H0: No co-integration
H1: Co-integration exists.

Since the probability is less than 0.05 then we cannot reject the null hypothesis. If we look at the prob.
from trace and eigenvalue table we can see that the probability value are greater than 0.05 which
means we can reject the null hypothesis and there is co-integration among the variables which means all
the variables have long-term effects on GDP. Here we should keep in consideration that GDP is not
dependent on these 3 variables only that are why we get the probability of none 0.35 and 0.44. But the
probability of at most 1 is higher so it is ok which indicates that these variables have long-term effects.
So the decision is all 4 variables are co-integrated.

9
Granger Causality Test:
Granger Causality test is to determine whether there is any causal relationship between the variables
selected for analysis. Here, we have tried to find out if ‘Total Reserve’, ‘Remittance Received’, ‘FDI’ and
GDP at constant 2010 price have any causal relationship among them. The table on the following page is
an output of Granger Causality Test from E-Views.

Pairwise Granger Causality Tests

Sample: 1971 2016
Lags: 2
Null Hypothesis: Obs F-Statistic Prob.
D(REMITTANCE) does not Granger Cause FDI 0.98238 0.3837
FDI does not Granger Cause D(REMITTANCE) 43 2.37037 0.1071
D(GDP) does not Granger Cause FDI 0.34522 0.7103
FDI does not Granger Cause D(GDP) 43 1.51726 0.2323
D(TOTAL RESERVES) does not Granger Cause (FDI) 0.00967 0.9904
FDI does not Granger Cause D(TOTAL RESERVES) 43 0.08722 0.9167
D(GDP) does not Granger Cause D(REMITTANCE) 43 1.88779 0.1653
D(REMITTANCE) does not Granger Cause D(GDP) 1.22435 0.3053
D(TOTAL RESERVES) does not Granger Cause D(REMITTANCE) 43 2.31806 0.1122
D(REMITTANCE) does not Granger Cause D(TOTAL RESERVES) 0.24759 0.7819
D(TOTAL RESERVES) does not Granger Cause D(GDP) 43 0.57603 0.5670
D(GDP) does not Granger Cause D(TOTAL RESERVES) 0.15423 0.8576
Table 6- Granger-Causality test

In these Granger- causality test, lag length is used based on the information of Akaike info.
Criterion (AIC) and Schwarz criterion (SIC) provided in the ADF (Augmented Dicky-Fuller) test
table as they suggest to use a lag length of 0 for ‘Total Reserve’ and for ‘Remittance Received’.

we cannot use 0 lag length to run a causality test, we have to use a suggested lag length of 2
and at each hypothesis, we failed to reject the null as the Prob. Value is higher than the
optimum level of 0.05 or 5%. From these results, we can conclude that each of the variables
does not Granger cause any other variables in either way. If we use a lag length of 1, we have
got one exceptional result which is as follows:
10
Null Hypothesis: No. of Observation F-Statistic Prob.
D(REMITTANCE) does not Granger Cause FDI 0.02567 0.8735
44
FDI does not Granger Cause D(REMITTANCE) 4.35388 0.0432

In this table, we can see that F-Statistic is little high and Prob. Value is lower than 0.05, in this
case, we can reject the null hypothesis, that means, FDI does a Granger cause on Remittance
Received in the context of Germany. Therefore, FDI and Remittance Received has a one-way
directional causal relationship. At last, we can construe that there is no significant causal
relationship among the variables.

Regression Analysis:
Regression analysis of the model and its interpretation is discussed below,

Descriptive Statistics
Mean Std. Deviation N
GDP 269262597475 665066862255.
46
7.0435 91700
Remittance 5561048790.5 5094368105.83
46
196 613
FDI 27816398848. 44767050432.8
46
2326 1336
Reserve 109412747007 52098032010.5
46
.9783 9769

After performing linear regression analysis in SPSS, from the descriptive table, the outcome has been
shown. The total number of observation is 46. And Respective means for each variable has been given.

11
The variables have a significant correlation between them. Remittance and Reserve have a relatively
high correlation with GDP (0.868 and 0.804 respectively) and FDI relatively has little correlation with
GDP.

Correlations
GDP Remittance FDI Reserve
Pearson Correlation GDP 1.000 .868 .570 .804
Remittance .868 1.000 .420 .914
FDI .570 .420 1.000 .387
Reserve .804 .914 .387 1.000
Sig. (1-tailed) GDP . .000 .000 .000
Remittance .000 . .002 .000
FDI .000 .002 . .004
Reserve .000 .000 .004 .
N GDP 46 46 46 46
Remittance 46 46 46 46
FDI 46 46 46 46
Reserve 46 46 46 46

The R square value is 0.806, Which means the model can explain 80% of the variation in GDP by selected
variables (REM, RES, FDI).

12
From the Coefficient Table, we can conclude at 95% confidence level that Remittance may have a
greater effect on GDP followed by FDI and Foreign Exchange Reserve. There is multicollinearity in the
data in this regression model because VIF value of Remittance and Reserve is above the minimum level
of 4 (6.242 and 6.051 respectively). Based on the coefficients table, we can estimate an equation.

Conclusion
Keeping in view the significance of the key factors of economic growth of Germany, this report analyzed
the effects of Foreign Direct Investment, Total Remittance received and Total Reserve of foreign
exchange on the GDP of Germany over the period 1971-2016 by applying Correlogram, Unit-root
Test, Johansen Co-integration Test, Granger Causality Test, and finally Regression analysis. Among all
independent variables, the estimated coefficient of ‘Total Remittance Received’ was found
comparatively large in the context of Germany. Consequently, a medium contribution by these factors
was observed significantly in the GDP compared to other key factors. Although adverse external
environment continues to add to domestic uncertainties associated with the drastic change in a regional
socio-political area like Brexit and Refugee of Syria across Germany, are thus continuously putting
pressure on Bangladesh’s aggregate demand and economic growth.

13
References

 Buckley, P.J., Clegg, L.J., Cross, A.R., Liu, X., Voss, H. and Zheng, P., (2007). The determinants of
Chinese outward foreign direct investment. Journal of international business studies, 38(4),
pp.499-518.
 Chakraborty, C. and Basu, P. (2002). Foreign direct investment and growth in India: A
cointegration approach. Applied Economics, 34(9), pp.1061-1073.
 Gapen, M.T., Chami, M.R., Montiel, M.P., Barajas, M.A. and Fullenkamp, C. (2009). Do workers'
remittances promote economic growth? (No. 9-153). International Monetary Fund.
 Gujarati, D. (2009). Basic econometrics. 5th ed. New York: McGraw-Hill.
 Gupta, S., Pattillo, C.A. and Wagh, S. (2009). Effect of remittances on poverty and financial
development in Sub-Saharan Africa. World development, 37(1), pp.104-115.
 Payne, J.E. (2010). Survey of the international evidence on the causal relationship between
energy consumption and growth. Journal of Economic Studies, 37(1), pp.53-95.
 Rodrik, D. (2006). The social cost of foreign exchange reserves. International Economic Journal,
20(3), pp.253-266.
 Sahoo, P. (2006). Foreign direct investment in South Asia: Policy, trends, impact and
determinants.

14
Appendix

Time Series Data:

GDP at constant 2010 Remittance
prices FDI(Net Inflows, Total Reserves
Year Received( Current $
Current US$) (Current US$)
US Dollars2 US )

1971 1,582,110,001,732 209930938.7 1103338755 19312523395

1972 1,650,146,131,454 245852554.3 1897270696 26942103304

1973 1,728,981,646,933 313813690.2 2102302343 41407633837

1974 1,744,370,771,474 357406890.9 2176992344 49293767750

1975 1,729,251,631,521 419735931.4 690496822.9 42710976245

1976 1,814,836,763,015 449990753.2 1321369938 45867199927

1977 1,875,583,307,415 535669250.5 949983808.6 54220834450

1978 1,932,010,097,618 731329772.9 1603458933 75286223392

1979 2,012,195,536,300 849240966.8 1732552304 1.01318E+11

1980 2,040,543,923,696 2380181152 342426421.3 1.04702E+11

1981 2,051,343,309,320 2117616699 320000208.4 81553651369

1982 2,043,243,770,102 2231766357 760702889.3 88250228616

1983 2,075,371,942,519 2118541992 1724036789 78986153756

1984 2,133,958,609,820 1968478394 529910797.9 69485148466

1985 2,183,635,783,876 2022923706 821452292 75504358025

15
1986 2,233,582,942,652 2779070313 2241274122 88940673108

1987 2,264,901,161,041 3582102295 2118621892 1.24834E+11

1988 2,348,866,384,745 3834042969 1064750344 97575978902

1989 2,440,391,178,358 3751835205 7013826393 98876658479

1990 2,568,633,883,306 4876062012 3003918963 1.04547E+11

1991 2,699,846,419,247 4823001953 4748284117 96657198482

1992 2,751,786,253,950 4920209473 -2117171191 1.22686E+11

1993 2,725,474,628,467 4393696289 401340977.3 1.14822E+11

1994 2,792,449,673,948 4408901367 7290396144 1.13841E+11

1995 2,840,972,414,089 4506990223 11985480325 1.21816E+11

1996 2,864,208,659,764 4329001333 6429188834 1.18323E+11

1997 2,917,173,625,485 3831354070 12796405657 1.05208E+11

1998 2,974,922,531,540 3908027809 23635840374 1.08265E+11

1999 3,034,038,256,878 3756184438 55906671344 93407203990

2000 3,123,907,846,525 3604217128 2.47987E+11 87496906680

2001 3,176,872,812,246 3881051367 56930659865 82131848877

2002 3,176,872,812,246 4648818606 51222015765 89142564286

2003 3,154,319,996,079 5744477069 65348359021 96835220672

2004 3,191,224,606,760 6510982713 -20444719446 97169996159

2005 3,213,777,436,171 6865779219 59855759874 1.01676E+11

2006 3,332,692,329,600 7482286880 87441737296 1.11637E+11

ii
2007 3,441,355,939,341 9769923181 50845049519 1.35932E+11

2008 3,478,602,264,777 10973972375 30926055579 1.38564E+11

2009 3,283,144,458,442 12333262473 56668665258 1.7904E+11

2010 3,417,094,562,649 12791629121 86053684912 2.15978E+11

2011 3,542,160,228,940 15327620607 97480731020 2.34104E+11

2012 3,559,587,403,263 14643188037 65464274951 2.48856E+11

2013 3,577,014,590,830 16397702037 67407574807 1.98535E+11

2014 3,646,039,898,346 17364690462 16721265607 1.93485E+11

2015 3,709,597,862,509 16132501048 52576912741 1.73731E+11

2016 3,781,698,549,835 16683183243 52474196612 1.840313102E+11

iii
UNIT ROOT Test for GDP, FDI, Reserve, and Remittance

GDP (in ‘level’ and in 1st difference):

In ‘Level’:

Null Hypothesis: GDP_ has a unit root

Exogenous: Constant, Linear Trend
Lag Length: 0 (Automatic - based on SIC, maxlag=9)

t-Statistic Prob.*

Augmented Dickey-Fuller test statistic -2.663632 0.2559

Test critical values: 1% level -4.175640
5% level -3.513075
10% level -3.186854

*MacKinnon (1996) one-sided p-values.

st
In 1 difference:

Null Hypothesis: D(GDP) has a unit root

Exogenous: Constant, Linear Trend
Lag Length: 1 (Automatic - based on SIC, maxlag=9)

t-Statistic Prob.*

Augmented Dickey-Fuller test statistic -6.329987 0.0000

Test critical values: 1% level -4.186481
5% level -3.518090
10% level -3.189732

*MacKinnon (1996) one-sided p-values.

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FDI (in ‘level’):

In ‘Level’:

Null Hypothesis: FDI_NET_INFLOWS__CURRENT_US$_ has a unit root

Exogenous: Constant, Linear Trend
Lag Length: 0 (Automatic - based on SIC, maxlag=9)

t-Statistic Prob.*

Augmented Dickey-Fuller test statistic -5.240141 0.0005

Test critical values: 1% level -4.175640
5% level -3.513075
10% level -3.186854

*MacKinnon (1996) one-sided p-values.

Reserve (in ‘level’ and in 1st difference):

In ‘Level’:

Null Hypothesis: TOTAL_RESERVES__CURRENT_US$_ has a unit root

Exogenous: Constant, Linear Trend
Lag Length: 0 (Automatic - based on SIC, maxlag=9)

t-Statistic Prob.*

Augmented Dickey-Fuller test statistic -2.018921 0.5754

Test critical values: 1% level -4.175640
5% level -3.513075
10% level -3.186854

*MacKinnon (1996) one-sided p-values.

v
 st
In 1 difference:
Null Hypothesis: D(TOTAL_RESERVES__CURRENT_US$_) has a unit root
Exogenous: Constant, Linear Trend
Lag Length: 0 (Automatic - based on SIC, maxlag=9)

t-Statistic Prob.*

Augmented Dickey-Fuller test statistic -5.617448 0.0002

Test critical values: 1% level -4.180911
5% level -3.515523
10% level -3.188259

*MacKinnon (1996) one-sided p-values.

Reserve (in ‘level’ and in 1st difference):

In ‘Level’:
Null Hypothesis: REMITTANCE_RECEIVED__CURRENT_$_US__ has a unit root
Exogenous: Constant, Linear Trend
Lag Length: 0 (Automatic - based on SIC, maxlag=9)

t-Statistic Prob.*

Augmented Dickey-Fuller test statistic -0.676229 0.9688

Test critical values: 1% level -4.175640
5% level -3.513075
10% level -3.186854

*MacKinnon (1996) one-sided p-values.

st
In 1 difference:
Null Hypothesis: D(REMITTANCE_RECEIVED__CURRENT_$_US__) has a unit root
Exogenous: Constant, Linear Trend
Lag Length: 0 (Automatic - based on SIC, maxlag=9)

t-Statistic Prob.*

Augmented Dickey-Fuller test statistic -6.680909 0.0000

Test critical values: 1% level -4.180911
5% level -3.515523
10% level -3.188259

*MacKinnon (1996) one-sided p-values.

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Correlogram Test for GDP, FDI, Reserve, and Remittance
Correlogram of the variable ‘RES’ (Total Reserve) at 1st Difference:
Sample: 1971 2016
Included observations: 45
Autocorrelation Partial Correlation AC PAC Q-Stat Prob
. |*. | . |*. | 1 0.129 0.129 0.7966 0.372
. |*. | . |*. | 2 0.117 0.102 1.4724 0.479
.*| . | .*| . | 3 -0.101 -0.131 1.9819 0.576
**| . | **| . | 4 -0.264 -0.259 5.5682 0.234
.|. | . |*. | 5 0.013 0.110 5.5776 0.350
.*| . | .*| . | 6 -0.176 -0.148 7.2612 0.297
.|. | .|. | 7 0.014 -0.022 7.2714 0.401
.|. | .|. | 8 -0.002 -0.016 7.2717 0.508
.|. | .|. | 9 -0.054 -0.060 7.4414 0.591
.*| . | **| . | 10 -0.166 -0.272 9.1029 0.522
.*| . | .|. | 11 -0.134 -0.063 10.227 0.510
.*| . | .*| . | 12 -0.098 -0.088 10.848 0.542
.|. | .|. | 13 0.040 0.000 10.954 0.615
.|. | .*| . | 14 0.061 -0.073 11.210 0.669
.|. | .|. | 15 0.022 -0.065 11.245 0.735

Correlogram of the variable ‘FDI’ (FDI as Net Inflows at Current US$) at Level:
Sample: 1971 2016

Included observations: 46
Autocorrelation Partial Correlation AC PAC Q-Stat Prob
. |*** | . |*** | 1 0.450 0.450 9.9326 0.002
. |** | . |*. | 2 0.311 0.136 14.795 0.001
. |** | . |*. | 3 0.320 0.176 20.060 0.000
. |*. | .*| . | 4 0.135 -0.109 21.014 0.000
. |** | . |** | 5 0.285 0.255 25.402 0.000
. |** | . |*. | 6 0.306 0.104 30.578 0.000
. |*. | .|. | 7 0.170 -0.042 32.219 0.000
. |*. | .*| . | 8 0.101 -0.127 32.816 0.000
. |*. | . |*. | 9 0.152 0.132 34.196 0.000
. |** | . |*. | 10 0.247 0.202 37.930 0.000
. |** | .|. | 11 0.220 -0.012 40.981 0.000
. |*. | .*| . | 12 0.112 -0.183 41.789 0.000

vii
Correlogram of the variable ‘REM’ (Total Remittance Received at Current US$) at 1st Difference:
Sample: 1971 2016
Included observations: 45
Autocorrelation Partial Correlation AC PAC Q-Stat Prob
.|. | .|. | 1 0.055 0.055 0.1452 0.703
. |** | . |** | 2 0.269 0.267 3.7142 0.156
. |** | . |** | 3 0.253 0.246 6.9448 0.074
. |*. | . |*. | 4 0.161 0.097 8.2758 0.082
. |*. | .|. | 5 0.087 -0.042 8.6733 0.123
. |*. | .|. | 6 0.083 -0.047 9.0479 0.171
.|. | .|. | 7 0.018 -0.065 9.0651 0.248
.*| . | .*| . | 8 -0.108 -0.173 9.7364 0.284
.*| . | .*| . | 9 -0.073 -0.109 10.047 0.347
.|. | .|. | 10 -0.050 0.014 10.197 0.423
.*| . | .|. | 11 -0.139 -0.026 11.401 0.410
.*| . | .|. | 12 -0.111 -0.026 12.191 0.430
.*| . | .|. | 13 -0.137 -0.060 13.439 0.414
.*| . | .*| . | 14 -0.183 -0.110 15.726 0.330
.|. | .|. | 15 -0.040 0.059 15.841 0.393

viii