IBU17099907 Econometrics Assisgnment IBU17099907 Econometrics Assisgnment

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IBU17099907 Econometrics Assisgnment
Econometrics (Xiamen University Malaysia)
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Low Kim Yee XIAMEN UNIVERSITY MALAYSIA

SEM205 Econometrics 2020/09
Mark:
Course Code : SEM205

Course Name : Econometrics
Lecturer : Associate Professor Dr. Ngerng Miang Hong
Academic Session : 2020/09
Assignment: Identifying determinants of GDP of
Assessment Title :
selected nation – China
Submission Due Date : Week 12
Prepared by : Student ID Student Name

IBU1709907 Low Kim Yee
Date Received :
Feedback from Lecturer:
Own Work Declaration

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I hereby understand my/our work would be checked for plagiarism or other

misconduct, and the softcopy would be saved for future comparison(s).
I/We hereby confirm that all the references or sources of citations have been correctly
listed or presented and I/we clearly understand the serious consequence caused by any
intentional or unintentional misconduct.
This work is not made on any work of other students (past or present), and it has not
been submitted to any other courses or institutions before.
Signature:
Date: 31/12/2020

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Table of Content
1. Introduction 3
2. Factors that affect GDP 5
2.1 Government Consumption 5

2.2 Private Consumption 5
2.3 Investment 6
2.4 Net Export 6
3. Hypothesis
3.1 Hypothesis 1 6
3.2 Hypothesis 2 6
3.3 Hypothesis 3 6
3.4 Hypothesis 4 7
4. Assumption test 7
4.1 Autocorrelation Test 7

4.2 Multicollinearity Test 7
4.3 Heteroscedasticity 8
5. Double Log Model 16
6. Lin Log Model 22
7. Conclusion 31
8. References 33
9. Appendix
A. Turnitin 34
B. Marking Rubric 35

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1. Introduction
China GDP:
In 2019, China’s GDP was 14.4 trillion US dollars, ranking second in the
world and the United States ranking first. In the past few decades, China has
experienced exponential growth, broke the barriers of closed, centrally planned
economy, and developed into a world manufacturing and export centre. Given its huge
manufacturing and export base, China is often referred to as the “world workshop”.
However, over the years, the role of the service industry has increased, while the
contribution of the manufacturing industry to GDP has declined relatively. In the year
of 1980, China is the seventh largest economy in the world, with a GDP of US$305.35
billion, while the US economy is US$2.86 trillion. Since market reforms began in
1978, the Asian giant has grown by an average of 10% per year. In recent years,
China’s economic growth has slowed down, but it is still high compared to other
countries.
The IMF expects growth by 5.8% in 2020 and to drop to about 5.6 % by
2023.Over the years, the gap in the size of the Chinese and American economies has
been rapidly narrowing. In the year of 2018, China's nominal GDP was US$13.37
trillion, which was US$7.21 trillion less than that of the United States. It is estimated
that by 2020, this gap will be reduced to US$7.05 trillion and US$ 5.47 trillion by
2023.In terms of purchasing power parity, china is the world’s largest economy with a
gross domestic product (PPP) of US$ 25.27 trillion. By 2023, China’s GDP (PPP) will
reach US$ 36.99 trillion US dollars. China’s huge population has reduced its per
capita GDP to US$10,100 (70th)

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Figure 1 China's GDP
2. Factors that affect GDP
2.1 Government Consumption
For this indicator, showed the data of Chana GDP from 1960 to 2018. Over the
period of time, the average of China GDP was 13.44%. In 1967 the GDP have reached
rock bottom to 10.82%. Than reach to a greatest point in the year of 2000 was
16.63%. Since 2018 the latest version is 14.68%. In contrast, the average of 153
countries and regions in the world was 16.29% in the year of 2018.
2.2 Private Consumption
December 2019, private consumption accounted nominal GDP for 38.8%,

compared to 38 in the same period. From 1952-2019, the contribution of China’s
private consumption to nominal GDP was updated every year. It accounting for an
average of 49.7% and set high record as 71% in the year of 1962 and a low record as
34.6% in 2010. CEIC uses annual private consumption expenditure and annual
nominal GDP to calculate private consumption expenditure and annual nominal GDP
to calculate private consumption as a percentage of GDP. The National Bureau of
Statistics provides private consumption expenditure in local currency and nominal
currency.

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2.3 Investment
Total investment in China as a percentage of GDP. The unit is a percentage of

GDP, it is expected to start after the year of 2018. The total investment ratio expressed
in local currency to GDP expressed in local currency. Total investment or capital
formation is measured by the unit or department’s total fixed capital formation,
changes in inventory and purchases, and the total value of disposal of valuables.
2.4 Net Export
Over the period of time, the average level in China was 14.244%, which was
as low as 2.49% in the year of 1970. On the other hand, there is as high as 36.04% in
2006. Since 2018 the latest valuation is 19.51%. In contrast, 2018 the world average
based on 162 countries and region is 44.70%. View global rankings or use the country
comparator to compare trends over time.
3. Hypothesis
3.1 Hypothesis 1
H0: There is significant relationship between Government consumption and GDP.
H1: There is no significant relationship between Government consumption and GDP.
3.2 Hypothesis 2
H0: There is significant relationship between private consumption and GDP.
H1: There is no significant relationship between consumption and GDP.
3.3 Hypothesis 3
H0: There is significant relationship between Investment and GDP.
H1: There is no significant relationship between investment and GDP.

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3.4 Hypothesis 4
H0: There is significant relationship between net export and GDP.
H1: There is significant relationship between net export and GDP.
4. Assumption test
In this hypothesis test for this assignment, the ordinary least squares model
and the Lin-log model will be listed. In these three models, it will provide different
types of hypothesis testing, including autocorrelation test, multiple commonality test
and heteroscedasticity test.
4.1 Autocorrelation Test
Autocorrelation can be called lagging correlation or serial correlation, because

it could be measure the relationship between the current value of a variable and its
past value. When calculating autocorrelation, according to traditional correlation
statistic, the output can be between 1 and -1. Ann autocorrelation of +1 means a
complete positive correlation which is an increase in one-time series results in a
corresponding increase in another series. On the other hand, an autocorrelation of -1
means a complete negative correlation which is the increase seen in a time series.
Autocorrelation measures a linear relationship; even if the autocorrelation is small,
there may still be a nonlinear relationship between the time series and its own lagging
version. (Baltagi, Heun Song, Cheol Jung & Koh, 2007)
4.2 Multicollinearity Test
When two or more predictors are highly correlated, multicollinearity usually occurs.
In other words, one predictor variable can be used to predict another. This creates
redundant information and biases the results in the regression model. Examples of
relevant predictors which also called multicollinearity are a person's height and
weight, age and car price, years of education, and annual income. (Klein &
Nakamura, 1962)

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4.3 Heteroscedasticity
In statistics, when the standard error of the monitored variable at a given time
is not constant, heteroscedasticity occurs. Due to heteroscedasticity, visual inspection
of the residue showed signs of spreading over time, as shown in the figure below.
Heteroskedasticity usually appears in two forms: conditional and

unconditional. When the future high volatility and low volatility cannot be
determined, conditional heteroscedasticity is determined to be extremely volatile. Can
determine unconditional heteroscedasticity during periods of high and low volatility
in futures. (Li & Lin, 2009)
4.0 Base linear model

Table 4.1 Dependent Variable: GDP
Method: Least Squares
Date: 22/11/20 Time: 23:04
Sample: 1 49
Included observations: 49
Variable Coefficient Std. Error t-Statistic Prob.
C 4.87E+10 1.16E+10 4.197704 0.0001
GC 3.021544 0.632582 4.776523 0.0000
PC 0.204452 0.194122 1.053216 0.2981
INV 1.006676 0.066010 15.25045 0.0000
NE 0.727557 0.103316 7.042070 0.0000
FDI 8.93E+10 5.13E+10 1.740841 0.0889
R-squared 0.999888 Mean dependent var 2.59E+12
Adjusted R-squared 0.999875 S.D. dependent var 3.84E+12
S.E. of regression 4.29E+10 Akaike info criterion 51.91426
Sum squared resid 7.90E+22 Schwarz criterion 52.14591
Log likelihood -1265.899 Hannan-Quinn criter. 52.00214
F-statistic 77067.25 Durbin-Watson stat 1.627495
Prob(F-statistic) 0.000000
Breusch-Godfrey Serial Correlation LM Test:

Null hypothesis: No serial correlation at up to 2 lags
F-statistic 1.464950 Prob. F(2,41) 0.2429

Obs*R-squared 3.268051 Prob. Chi-Square(2) 0.1951
Table 4.2 Autocorrelation Test

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Equation:
Dependent Variable: RESID
Date: 22/11/20 Time: 23:09
Sample: 1 49
Presample missing value lagged residuals set to zero.
Coefficie
Variable nt Std. Error t-Statistic Prob.
-
C 1.43E+09 1.15E+10 -0.124329 0.9017
GC -0.189388 0.641733 -0.295119 0.7694
PC 0.046660 0.195165 0.239081 0.8122
INV 0.005601 0.065406 0.085634 0.9322
NE -0.006220 0.107380 -0.057927 0.9541
-
FDI 31242291 5.17E+10 -0.000604 0.9995
RESID(-1) 0.188310 0.171538 1.097779 0.2787
RESID(-2) -0.234388 0.176081 -1.331132 0.1905
R-squared 0.066695 Mean dependent var -0.000174

Adjusted R-
squared -0.092650 S.D. dependent var 4.06E+10
The conclusion of the multicollinearity test of the basic linear model: From Table 4.1,
there is no autocorrelation problem. From the result can see that in the range of 1.7 to
2.3, the chi-square value is 0.1951>0.05, and the Durbin-Watson statistic value is
1.785213.
Table 4.2 Multicollinearity

Variance Inflation Factors
Date: 22/11/20 Time: 23:13
Sample: 1 49
Coefficient Uncentered Centered

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Variable Variance VIF VIF
C 1.35E+20 3.590386 NA
GC 0.400160 4430.207 3041.682
PC 0.037683 5797.633 3904.009
INV 0.004357 466.7499 328.4385
NE 0.010674 4.819412 3.310023
FDI 2.63E+21 15.74959 12.21397
The conclusion of the multicollinearity test: From Table 4.2, we know that the
cantered VIF cannot exceed the value of 10, so we have multicollinearity in this
model. Table 4.3 below lists the adjusted multicollinearity VIF.
Table 4.3
Variance Inflation Factors
Date: 07/02/20 Time: 23:23
Sample: 1 49
C 6.27E+22 1.289474 NA
FDI 2.79E+23 1.289474 1.000000
Table 4.4 Heteroscedasticity Test (BP test)
Heteroskedasticity Test: Breusch-Pagan-Godfrey

Null hypothesis: Homoskedasticity
Scaled explained
SS 30.86407 Prob. Chi-Square(5) 0.0000
10

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Test Equation:
Dependent Variable: RESID^2
Date: 22/11/20 Time: 23:25
Sample: 1 49

C -6.69E+20 4.91E+20 -1.362835 0.1800
GC -7.16E+10 2.68E+10 -2.675290 0.0105
PC 2.14E+10 8.21E+09 2.609010 0.0124
INV -1.73E+09 2.79E+09 -0.617900 0.5399
NE 6.88E+09 4.37E+09 1.574051 0.1228
FDI 3.39E+20 2.17E+21 0.156285 0.8765

Adjusted R-
squared 0.548615 S.D. dependent var 2.70E+21
Table 4.5 Heteroskedasticity Test: White

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Scaled explained
Test Equation:
Date: 22/11/20 Time: 23:45
Sample: 1 49
Collinear test regressors dropped from specification
Coefficie
C 1.67E+21 5.87E+20 2.846078 0.0080

GC^2 10.99295 2.241103 4.905153 0.0000
GC*PC -6.836134 1.306369 -5.232926 0.0000
GC*INV 1.304394 0.280919 4.643306 0.0001
GC*NE -2.301885 0.618842 -3.719663 0.0009
-
GC*FDI 5.37E+11 5.53E+11 -0.971777 0.3392
GC 2.45E+11 8.82E+10 2.777722 0.0095
PC^2 1.064513 0.195629 5.441481 0.0000
PC*INV -0.407561 0.080851 -5.040910 0.0000
PC*NE 0.932613 0.173779 5.366651 0.0000
PC*FDI 1.00E+11 1.69E+11 0.591912 0.5585
-
PC 7.74E+10 2.42E+10 -3.196382 0.0033
INV^2 0.038969 0.043148 0.903156 0.3739
INV*NE -0.338437 0.073526 -4.602976 0.0001
INV*FDI 3.36E+10 6.07E+10 0.553443 0.5842
INV 1.46E+10 8.75E+09 1.662962 0.1071
NE^2 0.054394 0.055150 0.986295 0.3321
-
NE*FDI 4.38E+10 4.65E+10 -0.943201 0.3534
-
NE 1.05E+11 1.72E+10 -6.092973 0.0000
FDI^2 4.74E+22 1.63E+22 2.912537 0.0068
Adjusted R-
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The conclusion of the heteroscedasticity test: the results of the Bp test and the
White test both show that the test rejection H0 indicates that the variance is the same
square, and the alternative hypothesis H1 is the variance of the heteroscedasticity. The
following is a remedy for heteroscedasticity.
Table 4.6 Heteroskedasticity Test: Breusch-Pagan-Godfrey

Scaled explained
Test Equation:
Dependent Variable: WGT_RESID^2
Date: 22/11/20 Time: 23:51
Sample: 1 49
Coefficie
C 2.49E+21 2.15E+21 1.157799 0.2533

-
GC*WGT 5.82E+10 6.77E+10 -0.859076 0.3951
PC*WGT 7.27E+09 2.18E+10 0.332978 0.7408
INV*WGT 1.03E+10 7.92E+09 1.302987 0.1995
NE*WGT 1.50E+10 1.76E+10 0.852956 0.3984
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FDI*WGT 9.58E+20 8.76E+21 0.109318 0.9135

Adjusted R-
Result: After completing the weighted least squares, the chi-square is greater than
0.05.
Therefore, we do not reject H0.
5.0 Double Log Model
Dependent Variable: LOG(GDP)

Date: 22/11/20 Time: 23:57
Sample: 1 49
C 3.913327 0.269482 14.52164 0.0000
LOG(GC) 0.922505 0.011076 83.28643 0.0000
PC -1.42E-13 5.84E-14 -2.425199 0.0196
INV 1.95E-13 7.57E-14 2.575636 0.0135
NE 4.66E-13 1.41E-13 3.302260 0.0019
FDI 0.006589 0.060138 0.109558 0.9133
R-squared 0.999038 Mean dependent var 27.44359

Adjusted R-
squared 0.998927 S.D. dependent var 1.562047
S.E. of regression 0.051176 Akaike info criterion -2.992805
Sum squared resid 0.112617 Schwarz criterion -2.761153
Log likelihood 79.32372 Hannan-Quinn criter. -2.904916
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Autocorrelation Model
Table 5.1
Breusch-Godfrey Serial Correlation LM Test:


Test Equation:
Date: 22/11/20 Time: 23:58
Sample: 1 49
Coefficie
C -0.055699 0.211354 -0.263534 0.7935
LOG(GC) 0.002266 0.008687 0.260843 0.7955
PC 1.62E-14 4.60E-14 0.352733 0.7261
INV -1.92E-14 5.95E-14 -0.322653 0.7486
NE -8.45E-14 1.14E-13 -0.739149 0.4640
FDI 0.015277 0.047266 0.323212 0.7482
RESID(-1) 0.778078 0.152359 5.106862 0.0000
RESID(-2) -0.233451 0.155441 -1.501866 0.1408
R-squared 0.416565 Mean dependent var -2.87E-16

Adjusted R-
15

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The conclusion of the autocorrelation of the double logarithmic model: From

Table 5.1 we know that the chi-square value is 0.1358>0.05, so there is no
autocorrelation.
Multicollinearity test
Table 5.2 Variance Inflation Factors

Date: 11/12/20 Time: 00:12
Sample: 1 49

C 0.072621 1358.690 NA
LOG(GC) 0.000123 1492.279 5.743383
PC 3.40E-27 367.3188 247.3451
INV 5.73E-27 430.1368 302.6749
NE 1.99E-26 6.314433 4.336819
FDI 0.003617 15.19004 11.78003
The conclusion of the multicollinearity test of the double logarithmic model:

In Table 5.2, we know that the variable (GC&PC) is very high in its center VIF (>10).
Therefore, it has the problem of multicollinearity. Table 5.3 is the adjusted VIF table.
After removing two extremely high variables, the model becomes better.

Date: 11/12/20 Time: 00:42
Sample: 1 49

16

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C 0.055015 926.8317 NA
LOG(GC) 9.11E-05 997.2746 3.838243
NE 2.13E-26 6.079831 4.175692
FDI 0.001168 4.418543 3.426625
Heteroscedasticity Test

Scaled explained
Test Equation:
Date: 11/12/20 Time: 00:47
Sample: 1 49
Coefficie
C -0.011288 0.013786 -0.818838 0.4172

LOG(GC) 0.000579 0.000561 1.031605 0.3078
NE -2.91E-15 8.58E-15 -0.338482 0.7366
FDI -0.002462 0.002009 -1.225506 0.2268
Adjusted R-
squared -0.007943 S.D. dependent var 0.003157


Scaled explained 5.069167 Prob. Chi-Square(8) 0.7502
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SS
Test Equation:
Date: 11/12/20 Time: 00:49
Sample: 1 49
Coefficie
C 0.602702 0.460932 1.307574 0.1985

LOG(GC)^2 0.001049 0.000766 1.369046 0.1786
LOG(GC)*NE -7.10E-15 2.32E-14 -0.306498 0.7608
LOG(GC)*FDI -0.006747 0.008856 -0.761859 0.4506
LOG(GC) -0.050203 0.037600 -1.335199 0.1894
NE^2 1.02E-25 1.02E-25 0.999516 0.3236
NE*FDI 3.68E-14 3.31E-14 1.113851 0.2720
NE 1.26E-13 6.24E-13 0.201887 0.8410
FDI^2 0.173080 0.242178 0.714683 0.4790
Adjusted R-
The conclusion of the heteroscedasticity test of the double logarithmic model:

As can be seen from the table above the chi-square, the value is 0.4406 (> 0.05),
therefore, we accept H0, the model is homoscedastic.
18

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6.0 Lin Log Model

Date: 11/12/20 Time: 00:59
Sample: 1 49
Coefficie
-
C 2.27E+11 2.77E+11 -0.819413 0.4171
LOG(GC) 9.80E+09 1.14E+10 0.861161 0.3939
PC 1.090804 0.059936 18.19956 0.0000
INV 0.917342 0.077729 11.80178 0.0000
NE 0.533466 0.145062 3.677515 0.0007
FDI 1.38E+11 6.18E+10 2.237825 0.0305
Adjusted R-
Autocorrelation Test
Table 6.2 Breusch-Godfrey Serial Correlation LM Test:

Test Equation:
19

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Date: 11/12/20 Time: 01:01
Sample: 1 49
Std.
Variable Coefficient Error t-Statistic Prob.
2.19
C -7.84E+10 E+11 -0.358162 0.7221
9.02
LOG(GC) 3.53E+09 E+09 0.392062 0.6970
0.057
PC -0.078893 657 -1.368315 0.1787
0.067
INV 0.084646 976 1.245228 0.2201
0.118
NE 0.028627 161 0.242271 0.8098
5.35
FDI 4.49E+09 E+10 0.083953 0.9335
0.162
RESID(-1) 0.640599 038 3.953391 0.0003
0.237
RESID(-2) -0.809082 783 -3.402610 0.0015

Adjusted R-
The conclusion of the autocorrelation test of the Lin Log model: From Table
6.2 we see that the chi-square is 0.0000, which means that we need to reject the null
hypothesis. Therefore, it has sequence correlation in the residual. In Table 6.3, I
deleted the sequence (lag pc) so that the chi-square becomes 0.9446>0.05.
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Table 6.3 Breusch-Godfrey Serial Correlation LM Test:


Test Equation:
Date: 11/12/20 Time: 01:15
Sample: 2 49
Coefficie
C 1.42E+08 7.70E+09 0.018499 0.9853
GC 0.004612 0.243715 0.018922 0.9850
LAGPC -0.002994 0.055645 -0.053801 0.9574
INV 0.002287 0.054488 0.041973 0.9667
NE -0.002770 0.097389 -0.028443 0.9775
-
FDI 1.84E+09 4.77E+10 -0.038618 0.9694
RESID(-1) 0.007160 0.166790 0.042927 0.9660
RESID(-2) 0.049589 0.162561 0.305049 0.7619

Adjusted R-
squared -0.172211 S.D. dependent var 3.76E+10
Multicollinearity Test

Date: 11/12/20 Time: 01:19
Sample: 1 49

C 7.66E+22 1358.690 NA
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LOG(GC) 1.29E+20 1492.279 5.743383

PC 0.003592 367.3188 247.3451
INV 0.006042 430.1368 302.6749
NE 0.021043 6.314433 4.336819
FDI 3.82E+21 15.19004 11.78003
The conclusion of the multicollinearity test of the Lin log model: From Table
6.4 we know that the centered VIF value of some variables is very high (> 10), so
there is multicollinearity in this model. In the following table 6.5, after adjusting the
variables (pc&inv), the centered VIF will become <10.
Table 6.5 Adjusted Variance Inflation Factors

Date: 11/12/20 Time: 01:30
Sample: 1 49

C 3.10E+25 926.8317 NA
LOG(GC) 5.13E+22 997.2746 3.838243
NE 12.00565 6.079831 4.175692
FDI 6.58E+23 4.418543 3.426625
Heteroscedasticity Test

Scaled explained
Test Equation:
Date: 11/12/20 Time: 01:33
Sample: 1 49
Variable Coefficie Std. Error t-Statistic Prob.
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nt
C 4.09E+22 1.95E+22 2.095834 0.0420

-
LOG(GC) 1.76E+21 8.01E+20 -2.192472 0.0338
PC 1.64E+10 4.22E+09 3.875547 0.0004
-
INV 1.64E+10 5.48E+09 -2.990067 0.0046
NE 2.85E+10 1.02E+10 2.790672 0.0078
-
FDI 1.78E+21 4.35E+21 -0.408489 0.6849
Adjusted R-

Scaled explained
Test Equation:
Dependent Variable: WGT_RESID^2
Date: 11/12/20 Time: 01:58
Sample: 1 49
Coefficie
C 3.18E+22 2.35E+22 1.352839 0.1866

LOG(GC)^2*WG
T^2 1.18E+19 1.75E+20 0.067527 0.9466
LOG(GC)*PC*W
GT^2 4.80E+09 5.07E+09 0.946123 0.3519
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LOG(GC)*INV* -
WGT^2 9.29E+09 6.71E+09 -1.384039 0.1769
LOG(GC)*NE*W -
GT^2 1.86E+10 1.13E+10 -1.648906 0.1100
LOG(GC)*FDI*W
GT^2 1.29E+23 1.24E+23 1.035260 0.3091
LOG(GC)*WGT^ -
2 6.87E+20 8.03E+21 -0.085542 0.9324
PC^2*WGT^2 -0.048962 0.036682 -1.334788 0.1923
PC*INV*WGT^2 0.145599 0.089606 1.624875 0.1150
PC*NE*WGT^2 -0.031964 0.117550 -0.271923 0.7876
-
PC*FDI*WGT^2 1.64E+11 7.41E+10 -2.219884 0.0344
-
PC*WGT^2 1.09E+11 1.19E+11 -0.922764 0.3637
INV^2*WGT^2 -0.096115 0.055282 -1.738632 0.0927
INV*NE*WGT^2 0.033911 0.136203 0.248975 0.8051
INV*FDI*WGT^2 1.29E+11 6.88E+10 1.873302 0.0711
NE^2*WGT^2 0.146311 0.091366 1.601365 0.1201
NE*FDI*WGT^2 4.69E+10 6.39E+10 0.732964 0.4695
NE*WGT^2 4.64E+11 2.71E+11 1.714616 0.0971
-
FDI^2*WGT^2 3.38E+24 3.25E+24 -1.039359 0.3072
WGT^2 9.50E+21 9.23E+22 0.102963 0.9187

Adjusted R-
The conclusion of the heteroscedasticity test of the Lin log model: from Table
6.7, the chi-square is 0.000, so we reject the null hypothesis and there is a
heteroscedasticity problem. Below Table 6.8 is the remedy for heteroscedasticity. I
use White's heteroscedasticity consistent standard error or robust standard error.
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Date: 11/12/20 Time: 02:03
Sample: 1 49
Huber-White-Hinkley (HC1) heteroskedasticity consistent standard
errors and covariance

C -2.27E+11 2.98E+11 -0.760322 0.4512
LOG(GC) 9.80E+09 1.26E+10 0.777850 0.4409
PC 1.090804 0.100124 10.89456 0.0000
INV 0.917342 0.116631 7.865308 0.0000
NE 0.533466 0.319173 1.671405 0.1019
FDI 1.38E+11 1.00E+11 1.376557 0.1758

Adjusted R-
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Prob(F-statistic) 0.000000 Wald F-statistic 30122.02

Prob(Wald F-
statistic) 0.000000
7.0 Conclusion
From the above table, we can know that the independent variable of
government expenditure is of great significance to the dependent variable. According
to the research of Sok-Gee Chan (2018), by examining the growth of real GDP per
capita in G7 countries, the inter-temporal interaction between the share of government
expenditure and the share of private investment in GDP, and the nature of the
relationship between government expenditure and the economy Get rid of growth.
Conducted a multivariate time series analysis, and paid special attention to the reason
for the pattern and shape of the impulse response function in the vector automatic
regression.
The analysis is based on historical data from the group of seven countries. The
empirical results show that the relationship between government spending and
economic growth may change significantly over time, and may also vary among
major industrialized countries, which may belong to the same "growth club." This
finding may partly explain the differences in the results of previous cross-sectional
studies. Most importantly, there is no consistent evidence that government spending
can increase output per capita. Negative views are not supported uniformly. In
addition, the study found that in most of the countries surveyed, public spending
accounts for at best a small part of economic growth.
As can be seen from the above table, private consumption has a small impact
on GDP. According to Wang, L. & Gao, W. (2011). The results show that China's
fiscal policy has obvious nonlinear effects. In 1978-1980 and 1984-1997, the
26

lOMoARcPSD|7661660

influence of government consumption on private consumption was not Keynesian.

During the same period, the impact of taxation was also non-Keynesian, but not
significant. The impact of government investment is linear but asymmetric. After re-
examining the reasons for the non-linear effects, we found that the initial fiscal
situation and the strength of fiscal consolidation have nothing to do with the non-
linear effects of fiscal policy. The government should pay close attention to the
characteristics of the commodity and labour markets to determine the conditions and
systems related to nonlinear effects.
According to the results of EViews, we can see that investment is critical to

the dependent variable (GDP). The overall investment development level from 1978
to 2015 explores China’s economic growth, takes into account the relationship
between investment growth in this period of high growth, and calculates the
investment/GDP ratio and the actual marginal capital output ratio (ICOR), In the
calculations, some comparisons were made with East Asia. The study found that since
then, China has achieved rapid growth and the share of investment in GDP has
increased, while ICOR has increased. Through rural industrialization and the
proliferation of small and medium-sized enterprises in the non-state sector, investment
efficiency has been achieved to a large extent. (Jun, 2003)
According to the analysis, the double logarithmic model has lower AIC and
SIC results, which means that the analysis based on this model is more reliable than
the linear model. According to the double logarithmic model, in addition to
government expenditure, the rest of the interception, private consumption, foreign
direct investment, and net exports are all important to GDP. The overall model is very
important, which can be proved by the results in the above table. The 2008 financial
crisis had a huge impact on China's subsequent GDP.
27

lOMoARcPSD|7661660

References:
Baltagi, B., Heun Song, S., Cheol Jung, B., & Koh, W. (2007). Testing for serial
correlation, spatial autocorrelation and random effects using panel data. Journal Of
Econometrics, 140(1), 5-51. doi: 10.1016/j.jeconom.2006.09.001
Jun, Z. (2003). Investment, investment efficiency, and economic growth in

China. Journal Of Asian Economics, 14(5), 713-734. doi:
10.1016/j.asieco.2003.10.004
Klein, L., & Nakamura, M. (1962). Singularity in the Equation Systems of

Econometrics: Some Aspects of the Problem of Multicollinearity. International
Economic Review, 3(3), 274. doi: 10.2307/2525395
Li, Y., & Lin, J. (2009). Heteroscedasticity diagnostics in two-phase linear regression
models. Journal Of Statistical Computation And Simulation, 79(7), 923-938. doi:
10.1080/00949650802058061
Sok-Gee Chan, Zulkufly Ramly, Mohd Zaini Abd Karim. (2017) Government
Spending Efficiency on Economic Growth: Roles of Value-added Tax. Global
Economic Review 46:2, pages 162-188.
Wang, L., & Gao, W. (2011). Nonlinear Effects of Fiscal Policy on Private
Consumption: Evidence from China. China & World Economy, 19(2), 60-76.
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Appendix A ：Turnitin Report
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Appendix B ：Marking Rubric
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IBU17099907 Econometrics Assisgnment

Econometrics (Xiamen University Malaysia)

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Low Kim Yee XIAMEN UNIVERSITY MALAYSIA

Course Code : SEM205

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2.1 Government Consumption 5

4.1 Autocorrelation Test 7

5. Double Log Model 16

6. Lin Log Model 22

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Figure 1 China's GDP

2. Factors that affect GDP

2.1 Government Consumption

2.2 Private Consumption

December 2019, private consumption accounted nominal GDP for 38.8%,

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Total investment in China as a percentage of GDP. The unit is a percentage of

2.4 Net Export

H0: There is significant relationship between Government consumption and GDP.

H1: There is no significant relationship between Government consumption and GDP.

H0: There is significant relationship between private consumption and GDP.

H1: There is no significant relationship between consumption and GDP.

H0: There is significant relationship between Investment and GDP.

H1: There is no significant relationship between investment and GDP.

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H0: There is significant relationship between net export and GDP.

H1: There is significant relationship between net export and GDP.

4.1 Autocorrelation Test

Autocorrelation can be called lagging correlation or serial correlation, because

4.2 Multicollinearity Test

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Heteroskedasticity usually appears in two forms: conditional and

4.0 Base linear model

Breusch-Godfrey Serial Correlation LM Test:

F-statistic 1.464950 Prob. F(2,41) 0.2429

Table 4.2 Autocorrelation Test

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R-squared 0.066695 Mean dependent var -0.000174

Table 4.2 Multicollinearity

Coefficient Uncentered Centered

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Variable Variance VIF VIF

Table 4.4 Heteroscedasticity Test (BP test)

Heteroskedasticity Test: Breusch-Pagan-Godfrey

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