Question

Based on the EViews result in Table 1, answer the following questions.

Table 1: Estimated Regression Result

Dependent Variable: LGDP

Method: Least Squares

Sample: 2000Q1 2012Q4

Included observations: 52

Variable Coefficient Std. Error t-Statistic Prob.

LM2 0.796910 0.032383 24.60868 0.0000

LREER -0.060125 0.065220 -0.921892 0.3613

LSDR 0.051745 0.074618 0.693465 0.4914

LTBR 0.029174 0.007715 3.781436 0.0004

C 2.795406 0.427355 6.541183 0.0000

R-squared 0.986591 Mean dependent var 13.28409

Adjusted R-squared 0.985450 S.D. dependent var 0.429315

S.E. of regression 0.051786 Akaike info criterion -2.992187

Sum squared resid 0.126044 Schwarz criterion -2.804568

Log likelihood 82.79686 Hannan-Quinn criter. -2.920258

F-statistic 864.5234 Durbin-Watson stat 0.777639

Prob(F-statistic) 0.000000

a. Write down the estimated result. [5 marks]

b. Examine the parameters of interest from the perspective of: (hint: used p-value)

[25 marks]

c. What is your conclusion about the relationship between parameter of interests

based on the empirical results? [4 marks]

d. Based on the empirical results in Table 1, what are the possible diagnostic

problems that you observe?

Answer 1

As part of (c), note that the elasticity of GDP with respect to M2 = 0.797, the elasticity of GDP wi th respect to REER = -0.060, the ealsticity of GDP with respect to SDR = 0.052 and the elasticity of GDP with respect to TBR = 0.029 respectively.