Applied statistics Essay Example | Topics and Well Written Essays - 1000 words

Applied statistics - Essay Example We apply econometric techniques over the period 1970 to 2002, involving 33 observations. In our notation, LGDP is natural logarithm (ln) of real Gross Domestic Product, LC is the log of consumption, LDI is the log of domestic investment, LX is the log of exports, LM is the log of imports, LG is the log of government expenditure and LFDI is the log of FDI. According to Gujarati (2004: 176-177), this model is called as the constant elasticity model that assumes a constant elasticity relationship between the independent variables and the dependent variable, logarithm of gross domestic product. The coefficients associated with the independent variables measure the elasticity of the dependent variable with respect to independent variables, or the percentage increase in the dependent variable (Gujarati 2004: 176). The methodology of this work is informed by the works of Woolridge 2004:2-6 as well as Gujarati 2004:10-12. We begin with economic growth model 1 in which the national income function Y=C+I+G+(X-M). In model 1, however, I = DI + FDI where DI = domestic investment and FDI = foreign direct investment. For model 1 and for the rest of model as well, we assume the existence of constant C in the regression. Otherwise, interpretation of the regression will be different without a slope (Gujarati 2004: 167-169). We need not worry on the interpretation of the constant in a regression because it need not always have an interpretation (Gujarati 2004: 167-169). Table 1 suggests that all regressor variables of the regression, except for LFDI and LG are significant at the 0.01 level. This means that for all coefficients, except LFDI and LG, we can reject the applicable null hypothesis that ï  ¢i =0 to accept alternative hypotheses that are consistent with economic theory. Based on the theory of the national income function in economics, we expect the signs to be as follows: ï  ¢2>0, ï  ¢3>0, ï  ¢4>0, ï  ¢5>0, ï  ¢6>0, and ï  ¢7