Year GDP LF CAP FDI FDIR change the variable FDI to growth rate

1981 14.12232 3.206803 0.119391 5.847883 0 then check VIF

1982 14.19521 3.229618 0.093694 6.877502 17.6067
1983 14.2608 3.252311 0.112018 6.28165 -8.663785
1984 14.29986 3.27364 0.105887 6.472408 3.03675
1985 14.38335 3.294354 0.097258 6.070777 -6.205279
1986 14.44504 3.296577 0.112428 7.758795 27.80563
1987 14.50152 3.346897 0.127098 7.525295 -3.009488
1988 14.5639 3.366951 0.129051 7.956161 5.72557
1989 14.61086 3.397858 0.131391 8.297765 4.293578
1990 14.65573 3.428164 0.138044 8.441463 1.731768
1991 14.7099 3.458837 0.157646 8.615285 2.059145
1992 14.78422 3.420346 0.160831 9.026884 4.777544
1993 14.80668 3.448399 0.150089 8.981063 -0.507606
1994 14.85109 3.472898 0.149083 9.276096 3.285057
1995 14.9012 3.476614 0.153051 9.521351 2.643946
1996 14.96755 3.500439 0.15217 10.51794 10.46689
1997 14.98663 3.559909 0.106728 10.18848 -3.132362
1998 15.00671 3.609295 0.147436 10.1647 -0.233401
1999 15.0477 3.63179 0.136641 10.00329 -1.587947
2000 15.08584 3.619529 0.144379 10.09933 0.960084
2001 15.10532 3.641263 0.159521 9.843933 -2.528851
2002 15.13596 3.679839 0.162562 10.30127 4.645877
2003 15.18214 3.700561 0.179779 10.75096 4.365384
2004 15.2543 3.743368 0.168327 10.90883 1.468427
2005 15.34009 3.766303 0.166561 11.41255 4.617544
2006 15.39665 3.857989 0.16222 12.25834 7.411052
2007 15.46257 3.872658 0.149441 12.64952 3.191134
2008 15.49876 3.926912 0.132684 12.69222 0.337562
2009 15.51583 3.964805 0.135106 12.57906 -0.89157
2010 15.55273 3.98991 0.134543 12.70123 0.971217
FDI to growth rate
 Chapter Multicollinearity Table 10.7 Longley Data change if needed

In eviews Year Price GNP Armed

Time Year Y X1 X2 X3 X4 X5 X1
1 1947 60,323 830 234289 2356 1590 107608 83
2 1948 61122 885 259426 2325 1456 108632 88.5
3 1949 60171 882 258054 3682 1616 109773 88.2
4 1950 61187 895 284599 3351 1650 110929 89.5
5 1951 63221 962 328975 2099 3099 112075 96.2
6 1952 63639 961 346999 1932 3594 113270 98.1
7 1953 64989 990 365385 1870 3547 115094 99
8 1954 63761 1000 363112 3578 3350 116219 100
9 1955 66019 1012 397469 2904 3048 117388 101.2
10 1956 67857 1046 419180 2822 2857 118734 104.6
11 1957 68169 1084 442769 2936 2798 120445 108.4
12 1958 66513 1108 444546 4681 2637 121950 110.8
13 1959 68655 1126 482704 3813 2552 123366 112.6
14 1960 69564 1142 502601 3931 2514 125368 114.2
15 1961 69331 1157 518173 4806 2572 127852 115.7
16 1962 70551 1169 554894 4007 2827 130081 116.9

drop variable X1 from the model and then check

drop variable X2 from the model and then check
drop variable X3 from the model and then check

Y number of people employed in thousands

X1 GDP price deflator
X2 GNP millions of dollars
X3 number of people unemployed in thousands
X4 number of people in armed forces
X5 non institutionalized population over 14 years of age
change if needed
Y X X1 X2
1100540 73 49967 10 High R2 and t stats are significant means no multic
1143986 76 58935 10 Check Pairwise correlation
1236060 78 70629 10 run auxillary regressions
1282517 80 84118 10 calculate VIF and TOL
1413535 83 97322 10 drop X and check again
1525497 85 108538 10
1625227 87 132233 12 tranform the variable into first difference
1735391 90 159882 13 y-y(-1) or d(y)
1823292 92 167312 14 now check all tests
1961718 95 191985 16
2069645 97 222842 17
2203186 100 259396 17
2371185 103 279378 18
2488790 105 300054 21
2599755 108 334991 22
2731343 111 398453 24
2941818 114 515202 25
2993527 116 608626 28
3105408 119 714348 31
3259517 122 812998 32
3417492 125 976155 36
3452159 128 1170525 41
3540198 132 1262521 45
3669774 135 1316989 50
3826109 138 1476676 54
3901961 141 1650126 62
4027777 145 1927995 60
4222976 148 2266163 58
4534149 152 2731053 58
4881796 156 3182515 60
5219631 159 3647047 60
re significant means no multicolinearity but lets check

e into first difference

Yt (Expenditure), indep -> Xt1(Income) and Xt2(Wealth)

Yt Xt1 Xt2
70 80 810
65 100 1009
90 120 1273
95 140 1425
110 160 1633
115 180 1876
120 200 2052
140 220 2201
155 240 2435
150 260 2686

A priori expected sign is +ive

for both X
both are expected to be significant in accordance to theory

Now check the regression

test for multicolineraity