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In: Economics

Do a VECM analysis in STATA by using the variables FDI, GDP, Trade openness, and Exchange...

Do a VECM analysis in STATA by using the variables FDI, GDP, Trade openness, and Exchange rate. FDI is chosen as the dependent variable.
Indicate the commands for the stationarity, lag choice, and model stability.
Provide the Impulse Response Functions where FDI is the response function.

year fdi_inflow gdpcurrentus exportimport exneer exchangerate imf_gdpgrowth
1980 18000000 6.88E+13 3,679,337 1177121 84.8 -779
1981 95000000 7.10E+13 5,264,455 961635.3 81.88 4,365
1982 55000000 6.46E+13 6,498,011 745894.3 71.79 3,429
1983 46000000 6.17E+13 6,202,309 597710 73.95 4,758
1984 1.13E+11 6.00E+13 6,631,572 417444.8 67.54 6,823
1985 99000000 6.72E+13 7,015,557 315436.7 70.84 4,258
1986 1.25E+11 7.57E+13 6,714,885 204526 58.72 6,941
1987 1.15E+11 8.72E+13 7,197,477 144375.8 53.64 10,027
1988 3.54E+11 9.09E+13 8,135,124 85744.17 52.89 2,121
1989 6.63E+11 1.07E+14 736,106 61377.55 58.31 253
1990 6.84E+11 1.51E+14 5,810,786 46146.9 66.53 9,255
1991 8.10E+11 1.50E+14 6,458,618 29789.26 67.31 926
1992 8.44E+11 1.59E+14 6,433,734 17731.78 64.93 5,984
1993 6.36E+11 1.80E+14 5,214,379 12365.01 72.31 8,042
1994 6.08E+11 1.31E+14 7,780,772 4567.87 52.74 -5,456
1995 8.85E+11 1.70E+14 6,059,266 2776.45 58.7 719
1996 7.22E+11 1.82E+14 5,323,459 1604.04 59.3 7,007
1997 8.05E+11 1.90E+14 5,408,106 944.86 63.34 7,528
1998 9.40E+11 2.69E+14 5,873,941 573.48 69.54 3,092
1999 7.83E+11 2.50E+14 6,537,102 365 71.77 -3,389
2000 9.82E+11 2.67E+14 5,096,049 268.71 80.15 664
2001 3.35E+12 1.96E+14 7,568,819 142.44 63.98 -5,962
2002 1.08E+12 2.33E+14 6,994,458 113.54 72.46 643
2003 1.70E+12 3.03E+14 6,814,688 100.74 78.94 5,608
2004 2.79E+12 3.92E+14 6,476,041 98.57 82.1 9,644
2005 1.00E+13 4.83E+14 6,292,181 104.17 91.65 901
2006 2.02E+13 5.31E+14 6,128,172 97.33 91.62 711
2007 2.21E+13 6.47E+14 6,307,776 100 100 503
2008 1.99E+13 7.30E+14 6,537,179 96.29 102.47 845
2009 8.59E+12 6.15E+14 7,247,836 85.41 95.73 -4,704
2010 9.10E+12 7.31E+14 613,779 89.42 106.72 8,487
2011 1.62E+13 7.75E+14 5,601,475 76.8 94.67 11,113
2012 1.36E+13 7.89E+14 6,445,355 75.69 98.96 479
2013 1.29E+13 8.23E+14 6,032,023 71.08 97.88 8,491
2014 1.28E+13 7.99E+14 6,508,054 62.34 92.23 5,167

Solutions

Expert Solution

Error Correction term D_fdi_inflow | _ce1 | L1 is negative i.e -.5450331 but its significant which is less than 5% that why there is a long run casuality running from GDP, Export & Import and Exchange rate to FDI

but all the shrot run independent variable coefficient are insignificant because all the p value are greater than 5 % .

Rahul Sunny answered 2 years ago
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