Data and Model Specification

LNUR = α +β1LNATM + β2LNBB + β3LNSAV +β4LNP + µ (1)

LNUR = α + β1LNATM + β2LNBB + β3LNSAV + β4LNP + β5LNLR + β6LNPR + µ (2)

LNUR = α +β1LNATM +β2LNBB +β3LNSAV +β4LNP +β5LNLR +β6LNPR +β7LNGS +βLNLPR + µ (3)

LNUR = α + β1LNATM + β2LNBB + β3LNSAV + β4LNP +β5LNLR +β6LNPR +β7LNGS +β8LNLPR

+β9DUMMY +µ (4)

Dependent variable LNUR = Unemployment Rate

Independent Variables,

LNATM = Automated Teller Machine

LNBB = Bank Branches

LNSAV = Savings

LNP = Prisoner

LNLR = Literacy Rate

LNPR = Poverty Rate

LNGS = Government Spending

LNLPR = Labour Participation Rate

DUMMY = 1 for developing countries & 0 for developed countries

LN_UE LN_ATM LN_BB LN_GS LN_LABOR_PR LN_LR LN_PRISONER

 Mean  2.033887  3.575914  2.632532  2.806772  4.126018  4.460500  4.856887  
 Median  2.063058  3.935740  2.677591  2.312535  4.126328  4.566429  4.905275  
 Maximum  3.355153  5.506713  4.341725  6.482281  4.460607  4.604170  6.278521  
 Minimum  0.262364  0.336472  0.470004  0.908259  3.671479  2.949688  3.465736  
 Std. Dev.  0.671607  1.095941  0.889670  1.483214  0.156203  0.258004  0.630821  
 Skewness -0.290846 -1.033482 -0.360894  0.726788 -0.216786 -3.406650 -0.004802  
 Kurtosis  2.943109  3.713841  2.515522  2.501316  3.283673  17.54182  2.447375  

 Observations  81  81  81  81  81  81  81

 Variables 1 2 3 4

Intercept 3.714019 -0.543093 3.966923 4.190521

(0.0004) (0.5887) (0.0002) (0.0001)

Economic Variables

LNATM 1.793551 1.142138 2.226496 2.147064

(0.0769) (0.2571) (0.0291) (0.0352)

LNBB 2.057061 1.877345 -0.597600 -0.857200

(0.0431) (0.0644) (0.5520) (0.3942)

LNSAV -3.159671 -2.984758 -3.860586 -3.812286

(0.0023) (0.0038) (0.0002) (0.0003)

LNP -1.683751 -2.361734 -2.660517 -2.465409

(0.0963) (0.0208) (0.0096) (0.0161)

LNLR 1.987057 2.148708 2.067591

(0.0506) (0.0350) (0.0423)

LNPR 1.191563 1.565153 1.897314

(0.2372) (0.1219) (0.0619)

LNGS 2.647098 2.618070

(0.0100) (0.0108)

LNLPR -5.360337 -5.561689

(0.0000) (0.0000)

DUMMY -1.412167
(0.1623)

R- Square 0.291565 0.334916 0.573318 0.584975

Adjusted R-square 0.254279 0.280991 0.525909 0.532366
Durbin-Warson stat 2.125379 2.220197 2.449397 2.411215
F-statistics 7.819683 6.210702 12.09299 11.11934
(0.000025) (0.000026) (0.000000) (0.000000)
Observation 81 81 81 81
 1. Jarque-Bera normality test

Figure 1 Normality test

10
Series: Residuals
Sample 1 86
8 Observations 81

Mean -1.06e-15
6 Median 0.039328
Maximum 1.068833
Minimum -1.207377
4
Std. Dev. 0.432666
Skewness -0.055249
2
Kurtosis 3.041636

Jarque-Bera 0.047058
0 Probability 0.976745
-1.2 -1.0 -0.8 -0.6 -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0

Since the p-value of obtaining such a value from chi-square is about 0.97, which is quite high. In
other words, we may not reject the normality assumption in our study.

2. Model specification test (Ramsey-Reset test)

Null hypothesis: no specification error; there is a specification error.

Table 2 Omitted variables: squares of fitted values

Value df Probability
t-statistic 0.991383 70 0.3249
F-statistic 0.982840 (1, 70) 0.3249
Likelihood ratio 1.129377 1 0.2879

According to the test equation, Ramsey’s RESET test F-statistics value yield in Table 2 is quite high
probability values of 32% which is higher than the significance level.

Therefore, we failed to reject the null hypothesis meaning that the equation is not mis specified.
3. Detection of heteroskedasticity

Ho : The error variance is homoscedastic.

H1 : The error variance is not homoscedastic.

Table 3 Heteroskedasticity test: Breuch-Pagan-Godfrey

F-statistic 0.607107 Prob. F(9,71) 0.7870

Obs*R-squared 5.788102 Prob. Chi-Square(9) 0.7609
Scaled explained SS 4.539742 Prob. Chi-Square(9) 0.8724

The observed chi-square value is 0.8724 has a p value 0.76, suggesting that we are failed to
reject the null hypothesis. To put it differently, the regression does not suffer from the
problem of heteroscedasticity.

4. Detection of serial correlation LM test

F-statistic 3.509794 Prob. F(1,70) 0.0652

Obs*R-squared 3.867421 Prob. Chi-Square(1) 0.0492

The estimated value of Durbin-Watson is 1.87 since it is close to 2, it can be said that we are

fail to reject the null hypothesis.

For further testing of autocorrelation Breusch-Godfrey LM test is conducted

where, F-statistics probability is more than 5% level of significance meaning that there is

no evidence of positive or negative autocorrelation.