OLs

Dependent Variable: LGDP

Method: Least Squares
Date: 06/11/14 Time: 22:10
Sample (adjusted): 1970 2012
Included observations: 43 after adjustments


Variable Coefficient Std. Error t-Statistic Prob.


C 14.40750 1.468117 9.813594 0.0000
LAID 0.298614 0.088261 3.383328 0.0016
LAIDV -0.182197 0.109598 -1.662410 0.1044
LFDI 0.216494 0.024982 8.666023 0.0000


R-squared 0.914844 Mean dependent var 24.74118
Adjusted R-squared 0.908294 S.D. dependent var 0.616956
S.E. of regression 0.186833 Akaike info criterion -0.428797
Sum squared resid 1.361353 Schwarz criterion -0.264965
Log likelihood 13.21914 Hannan-Quinn criter. -0.368381
F-statistic 139.6618 Durbin-Watson stat 1.266385
Prob(F-statistic) 0.000000


interpretation :
the value of prob of LaidV is greater then 5 % which means there is no realation ship between Laidv and
GDP where as there is relationship between laid, fdi and gdp
t stat of laidv is less then 2 means no relation ship between the variables.
R2 value is greater then 70 % means model is good.

Auto correlation:

Breusch-Godfrey Serial Correlation LM Test:


F-statistic 3.856143 Prob. F(2,37) 0.0301
Obs*R-squared 7.416939 Prob. Chi-Square(2) 0.0245



Test Equation:
Dependent Variable: RESID
Method: Least Squares
Date: 06/11/14 Time: 22:19
Sample: 1970 2012
Included observations: 43
Presample missing value lagged residuals set to zero.


Variable Coefficient Std. Error t-Statistic Prob.


C -0.395279 1.400142 -0.282313 0.7793
LAID 0.033610 0.084768 0.396494 0.6940
LAIDV 0.062542 0.105275 0.594082 0.5561
LFDI -0.015573 0.024358 -0.639353 0.5265
RESID(-1) 0.335692 0.175268 1.915305 0.0632
RESID(-2) 0.221702 0.162678 1.362827 0.1812


R-squared 0.172487 Mean dependent var -2.05E-15
Adjusted R-squared 0.060661 S.D. dependent var 0.180037
S.E. of regression 0.174491 Akaike info criterion -0.525104
Sum squared resid 1.126538 Schwarz criterion -0.279356
Log likelihood 17.28975 Hannan-Quinn criter. -0.434480
F-statistic 1.542457 Durbin-Watson stat 1.917851
Prob(F-statistic) 0.200605



Interpratation :
probability between all the variables is greater then 5% means that there is no autocorrelation
between variables.



Heteroskedasticity Test: White



F-statistic 1.466113 Prob. F(9,33) 0.2015
Obs*R-squared 12.28240 Prob. Chi-Square(9) 0.1979
Scaled explained SS 10.26211 Prob. Chi-Square(9) 0.3297



Test Equation:
Dependent Variable: RESID^2
Method: Least Squares
Date: 06/11/14 Time: 22:21
Sample: 1970 2012
Included observations: 43


Variable Coefficient Std. Error t-Statistic Prob.


C -2.351916 12.79675 -0.183790 0.8553
LAID 0.369275 1.624176 0.227361 0.8215
LAID^2 -0.011104 0.052426 -0.211802 0.8336
LAID*LAIDV -0.040671 0.081272 -0.500437 0.6201
LAID*LFDI 0.004155 0.031893 0.130279 0.8971
LAIDV 0.885527 1.366539 0.648008 0.5215
LAIDV^2 0.128032 0.094453 1.355514 0.1845
LAIDV*LFDI -0.002281 0.024163 -0.094420 0.9253
LFDI -0.134296 0.491112 -0.273453 0.7862
LFDI^2 0.001115 0.004865 0.229139 0.8202


R-squared 0.285637 Mean dependent var 0.031659
Adjusted R-squared 0.090811 S.D. dependent var 0.045657
S.E. of regression 0.043535 Akaike info criterion -3.230097
Sum squared resid 0.062544 Schwarz criterion -2.820516
Log likelihood 79.44709 Hannan-Quinn criter. -3.079056
F-statistic 1.466113 Durbin-Watson stat 1.746053
Prob(F-statistic) 0.201474


interpretation :
Probability: probability of observed R squared is insignificance
i-e more than 5% which means variance = constant and therefore there is no Heteroskedasticity.


Johansan test :
Sample (adjusted): 1972 2012
Included observations: 41 after adjustments
Trend assumption: No deterministic trend (restricted constant)
Series: LAIDV LAID GDP FDI
Lags interval (in first differences): 1 to 1

Unrestricted Cointegration Rank Test (Trace)


Hypothesized Trace 0.05
No. of CE(s) Eigenvalue Statistic Critical Value Prob.**


None * 0.746752 101.1550 54.07904 0.0000
At most 1 * 0.501151 44.84623 35.19275 0.0034
At most 2 0.190564 16.33269 20.26184 0.1594
At most 3 0.170507 7.664581 9.164546 0.0955


Trace test indicates 2 cointegrating eqn(s) at the 0.05 level
* denotes rejection of the hypothesis at the 0.05 level
**MacKinnon-Haug-Michelis (1999) p-values

interpretation:
the is less then 5% at most 1 and none hence there are two co integrating equations.























Multicolinearity :

Covariance Analysis: Ordinary
Date: 06/11/14 Time: 22:28
Sample (adjusted): 1970 2012
Included observations: 43 after adjustments
Balanced sample (listwise missing value deletion)


Covariance
Correlation LFDI LGDP LAIDV LAID
LFDI 4.039894
1.000000

LGDP 1.155937 0.371783
0.943201 1.000000

LAIDV -0.005162 -0.004057 0.080875
-0.009030 -0.023395 1.000000

LAID 0.938955 0.298483 0.039502 0.342927
0.797735 0.835939 0.237199 1.000000


Interpratation :
as we can see that there exists multicolinarity between gdp and fdi , aid and gdp


Englo Granger :

Pairwise Granger Causality Tests
Date: 04/23/14 Time: 19:13
Sample: 1970 2013
Lags: 2


Null Hypothesis: Obs F-Statistic Prob.


LAIDV does not Granger Cause LFDI 41 0.85182 0.4351
LFDI does not Granger Cause LAIDV 0.12412 0.8837


LAID does not Granger Cause LFDI 41 0.70574 0.5004
LFDI does not Granger Cause LAID 3.35944 0.0460


LGDP does not Granger Cause LFDI 41 3.66039 0.0357
LFDI does not Granger Cause LGDP 4.38933 0.0197


LAID does not Granger Cause LAIDV 41 0.98681 0.3826
LAIDV does not Granger Cause LAID 416.413 1.E-25


LGDP does not Granger Cause LAIDV 41 1.03224 0.3665
LAIDV does not Granger Cause LGDP 0.26072 0.7719


LGDP does not Granger Cause LAID 41 4.19799 0.0230
LAID does not Granger Cause LGDP 1.22853 0.3047



interpretation :
laidv causes Lfdi and LFDI causes LAIDV because there prob is greater
then 5%
laid granger cause Lfdi but lfdi does not granger cause laid.
Laid granger cause laidv but laidv does not granger cause laid.
Lgdp granger cause laidv and laidv granger cause lgdp.
Lgdp does not granger cause laid and laid granger cause LGDP.


Lag Selection Criteria :

VAR Lag Order Selection Criteria
Endogenous variables: LAID LAIDV LFDI LGDP
Exogenous variables: C
Date: 06/11/14 Time: 22:46
Sample: 1970 2013
Included observations: 36


Lag LogL LR FPE AIC SC


0 -61.71971 NA 0.000453 3.651095 3.827042
1 130.1710 330.4785* 2.60e-08* -6.120614 -5.240881*
2 144.3486 21.26628 2.98e-08 -6.019365 -4.435846
3 154.7280 13.26261 4.47e-08 -5.707111 -3.419806
4 171.6627 17.87546 5.13e-08 -5.759036 -2.767945
5 196.8601 20.99791 4.36e-08 -6.270008 -2.575130
6 221.6793 15.16728 4.98e-08 -6.759963 -2.361299
7 269.2258 18.49030 2.79e-08 -8.512545* -3.410096


* indicates lag order selected by the criterion
LR: sequential modified LR test statistic (each test at 5% level)
FPE: Final prediction error
AIC: Akaike information criterion
SC: Schwarz information criterion
HQ: Hannan-Quinn information criterion


Interpretation:
The Schwarz criteria indicates asterisk (*) on the 7th year lag, therefore we select 9th year lag as it is
the best value- as revealed by SC criteria





VAR :

Vector Autoregression Estimates
Date: 06/11/14 Time: 22:49
Sample (adjusted): 1972 2012
Included observations: 41 after adjustments
Standard errors in ( ) & t-statistics in [ ]


LAID LAIDV LFDI LGDP


LAID(-1) 0.746048 1.163156 -2.058286 -0.110121
(0.40082) (1.40898) (3.33592) (0.10097)
[ 1.86131] [ 0.82553] [-0.61701] [-1.09058]

LAID(-2) 0.289137 -0.728814 2.075850 0.128888
(0.39800) (1.39906) (3.31243) (0.10026)
[ 0.72648] [-0.52093] [ 0.62669] [ 1.28549]

LAIDV(-1) -1.216549 -0.605515 -0.162343 -0.008759
(0.04773) (0.16778) (0.39725) (0.01202)
[-25.4880] [-3.60888] [-0.40867] [-0.72843]

LAIDV(-2) -0.333094 0.806507 -2.940181 -0.142924
(0.50278) (1.76739) (4.18450) (0.12666)
[-0.66251] [ 0.45633] [-0.70264] [-1.12840]

LFDI(-1) -0.036720 0.064733 0.225562 0.005633
(0.01929) (0.06781) (0.16056) (0.00486)
[-1.90343] [ 0.95457] [ 1.40487] [ 1.15905]

LFDI(-2) -0.007383 0.075019 0.142254 -0.012113
(0.01826) (0.06419) (0.15198) (0.00460)
[-0.40431] [ 1.16864] [ 0.93598] [-2.63293]

LGDP(-1) 0.007465 -4.933263 7.782251 1.222408
(0.58726) (2.06438) (4.88766) (0.14794)
[ 0.01271] [-2.38970] [ 1.59222] [ 8.26262]

LGDP(-2) 0.131812 4.136320 -5.976064 -0.225187
(0.55262) (1.94261) (4.59935) (0.13922)
[ 0.23852] [ 2.12926] [-1.29933] [-1.61753]

C -3.320239 8.162688 -33.12254 -0.161601
(1.82933) (6.43059) (15.2251) (0.46085)
[-1.81500] [ 1.26935] [-2.17552] [-0.35066]


R-squared 0.987795 0.415748 0.921589 0.999269
Adj. R-squared 0.984744 0.269685 0.901986 0.999087
Sum sq. resids 0.159095 1.965951 11.02031 0.010097
S.E. equation 0.070510 0.247863 0.586843 0.017763
F-statistic 323.7343 2.846363 47.01329 5470.342
Log likelihood 55.63593 4.094239 -31.24291 112.1601
Akaike AIC -2.274923 0.239305 1.963069 -5.032198
Schwarz SC -1.898773 0.615455 2.339219 -4.656048
Mean dependent 20.81099 -0.049509 19.23245 24.79078
S.D. dependent 0.570860 0.290039 1.874470 0.587760


Determinant resid covariance (dof adj.) 2.44E-08
Determinant resid covariance 9.06E-09
Log likelihood 146.9530
Akaike information criterion -5.412341
Schwarz criterion -3.907742


Interpretation:
Laidv at lag 1 has significant relationship with gdp.
Lfdi at lag 1 has significant relationship with laid and lgdp .
Lfdi at lag 2 has significant relationship with lgdp.
Lgdp at lag 1 has significant relationship with laid.


Two stage least square method


Ct = 1 + 2 Yt

Dependent Variable: CONSP
Method: Two-Stage Least Squares
Date: 05/15/14 Time: 19:59
Sample: 1973 2011
Included observations: 39
Instrument list: GDP


Variable Coefficient Std. Error t-Statistic Prob.


C 3.79E+09 6.16E+08 6.154563 0.0000
GDP 0.676527 0.009369 72.21280 0.0000


R-squared 0.992955 Mean dependent var 4.34E+10
Adjusted R-squared 0.992764 S.D. dependent var 2.05E+10
S.E. of regression 1.75E+09 Sum squared resid 1.13E+20
F-statistic 5214.688 Durbin-Watson stat 1.156784
Prob(F-statistic) 0.000000 Second-Stage SSR 1.13E+20


INTERPRETATION:
The coefficient of gdp (Yt) is positive and small, i.e. gdp has a significant positive relation with
consumption (consp). The value of R2 is very high, indicating all the relevant variables are been in the
equation.

It = v1 + v2 Yt + v3 Rt

Dependent Variable: INVST
Method: Two-Stage Least Squares
Date: 05/15/14 Time: 20:02
Sample (adjusted): 2004 2011
Included observations: 8 after adjustments
Instrument list: GDP INT


Variable Coefficient Std. Error t-Statistic Prob.


C 2.04E+08 8.12E+09 0.025089 0.9810
GDP 0.027766 0.077311 0.359147 0.7342
INT 2.09E+08 2.83E+08 0.737377 0.4940


R-squared 0.099752 Mean dependent var 3.04E+09
Adjusted R-squared -0.260347 S.D. dependent var 1.80E+09
S.E. of regression 2.02E+09 Sum squared resid 2.04E+19
F-statistic 0.277013 Durbin-Watson stat 0.868142
Prob(F-statistic) 0.768963 Second-Stage SSR 2.04E+19


INTERPRETATION:
The relationship of gdp and investment is positive but insignificant. Also the interest rate (int) has a
positive relation, with small coefficient but insignificant. That is, investment is not been determined by
the variables specified in the equation. The value of R2, hence, shows that the equation is missing some
important variables; as R2 is extremely less.

Yt = Ct + It + Gt

Dependent Variable: GDP
Method: Two-Stage Least Squares
Date: 05/15/14 Time: 20:05
Sample: 1973 2011
Included observations: 39
Instrument list: CONSP INVST GOVT


Variable Coefficient Std. Error t-Statistic Prob.


C -2.99E+09 1.44E+09 -2.071776 0.0457
CONSP 1.382258 0.047279 29.23608 0.0000
INVST 0.230274 0.459619 0.501011 0.6195
GOVT 0.004444 0.002767 1.605939 0.1173


R-squared 0.993683 Mean dependent var 5.86E+10
Adjusted R-squared 0.993142 S.D. dependent var 3.02E+10
S.E. of regression 2.50E+09 Sum squared resid 2.20E+20
F-statistic 1835.242 Durbin-Watson stat 0.909394
Prob(F-statistic) 0.000000 Second-Stage SSR 2.20E+20



INTERPRETATION:
Consumption (Ct) has a positive significant relation with gdp, but the coefficient of consumption is small.
However, investment and government expenditure have an insignificant relationship with gdp. The
value of R2 is high, indicating that the equation is good as it has all important variables.




ARCH / GARCH
Checking the conditions
1 cluster volatility :
-4E+10
-2E+10
0E+00
2E+10
4E+10
6E+10
0.0E+00
4.0E+10
8.0E+10
1.2E+11
1.6E+11
1975 1980 1985 1990 1995 2000 2005 2010
Residual Actual Fitted

in this we can say that low volatility of aid is obsereved after another low volatility of aid. In the same
way high volatility of aid is observed afther another high volatility of return. Hence there exist cluster
volatility .

2 . Arch effect :



Heteroskedasticity Test: ARCH


F-statistic 5.830090 Prob. F(1,40) 0.0204
Obs*R-squared 5.342861 Prob. Chi-Square(1) 0.0208



Test Equation:
Dependent Variable: RESID^2
Method: Least Squares
Date: 05/28/14 Time: 17:08
Sample (adjusted): 1971 2012
Included observations: 42 after adjustments


Variable Coefficient Std. Error t-Statistic Prob.


C 1.76E+20 6.80E+19 2.594986 0.0132
RESID^2(-1) 0.356397 0.147603 2.414558 0.0204


R-squared 0.127211 Mean dependent var 2.73E+20
Adjusted R-squared 0.105391 S.D. dependent var 3.76E+20
S.E. of regression 3.56E+20 Akaike info criterion 97.52741
Sum squared resid 5.07E+42 Schwarz criterion 97.61016
Log likelihood -2046.076 Hannan-Quinn criter. 97.55774
F-statistic 5.830090 Durbin-Watson stat 1.903940
Prob(F-statistic) 0.020420


we can see that the calue of observed R2 and the vale of chi square is less then 5% hence we interpret that there
exists arch effect.


ARCH and GARCH TEST




Dependent Variable: LAID
Method: ML - ARCH (Marquardt) - Student's t distribution
Date: 05/28/14 Time: 17:43
Sample (adjusted): 1970 2012
Included observations: 43 after adjustments
Convergence achieved after 87 iterations
Presample variance: backcast (parameter = 0.7)
t-distribution degree of freedom parameter fixed at 10
GARCH = C(4) + C(5)*RESID(-1)^2 + C(6)*GARCH(-1) + C(7)*LFDI


Variable Coefficient Std. Error z-Statistic Prob.


@SQRT(GARCH) -0.302293 0.751511 -0.402247 0.6875
C 1.319049 2.090963 0.630833 0.5281
LGDP 0.790625 0.088109 8.973257 0.0000


Variance Equation


C 0.011857 0.443103 0.026759 0.9787
RESID(-1)^2 0.452382 0.475827 0.950729 0.3417
GARCH(-1) -0.287816 0.492701 -0.584160 0.5591
LFDI 0.004830 0.023990 0.201340 0.8404


R-squared 0.703220 Mean dependent var 20.76694
Adjusted R-squared 0.653757 S.D. dependent var 0.592530
S.E. of regression 0.348659 Akaike info criterion 0.862315
Sum squared resid 4.376278 Schwarz criterion 1.149022
Log likelihood -11.53977 Hannan-Quinn criter. 0.968044
F-statistic 14.21699 Durbin-Watson stat 1.089475
Prob(F-statistic) 0.000000




@SQRT(GARCH) prob value is negative and insignificant. And tell us that is is not risky
Variance equation RESID(-1)^2 = Arch we can see that the arch effect results show that it is positive and the value
is greater then 5% means that the the volatality is not effected by Arch. That is it is not the internal cause of the
volatility. And it is significant.

GARCH(-1) = Garch we can see that the value is positive and it is greater the 5% hence our value is insignificant and
that is is also not an internal cause.
it also shows us that the FDI volatility cannot effect the aid volatility.
Serial autocorrelation :

Date: 05/28/14 Time: 17:50
Sample: 1970 2012
Included observations: 43


Autocorrelation Partial Correlation AC PAC Q-Stat Prob


. | . | . | . | 1 0.018 0.018 0.0144 0.904
. | . | . | . | 2 -0.020 -0.021 0.0342 0.983
. | . | . | . | 3 0.009 0.010 0.0379 0.998
. |** | . |** | 4 0.291 0.290 4.2378 0.375
.*| . | .*| . | 5 -0.115 -0.136 4.9100 0.427
**| . | **| . | 6 -0.248 -0.255 8.1141 0.230
.*| . | .*| . | 7 -0.084 -0.087 8.4918 0.291
. | . | . | . | 8 0.035 -0.043 8.5611 0.381
.*| . | .*| . | 9 -0.160 -0.098 10.015 0.349
.*| . | .*| . | 10 -0.197 -0.077 12.281 0.267
. | . | . | . | 11 -0.025 -0.031 12.318 0.340
. | . | .*| . | 12 0.004 -0.079 12.319 0.420
.*| . | .*| . | 13 -0.114 -0.104 13.165 0.435
.*| . | . | . | 14 -0.083 -0.059 13.627 0.478
. | . | . | . | 15 0.033 -0.054 13.702 0.548
.*| . | .*| . | 16 -0.076 -0.191 14.117 0.590
. | . | . | . | 17 -0.017 -0.034 14.139 0.657
.*| . | **| . | 18 -0.156 -0.248 16.028 0.591
. |** | . |*. | 19 0.264 0.181 21.642 0.302
. | . | . | . | 20 -0.011 -0.044 21.652 0.360


considering the p value. we can not reject the null hypothesis and there is no serial correlation.
there is arch effect but there is no serial correlation.
hence that is the bad side of the model.






Two stage least square method


Ct = 1 + 2 Yt

Dependent Variable: CONSP
Method: Two-Stage Least Squares
Date: 05/15/14 Time: 19:59
Sample: 1973 2011
Included observations: 39
Instrument list: GDP


Variable Coefficient Std. Error t-Statistic Prob.


C 3.79E+09 6.16E+08 6.154563 0.0000
GDP 0.676527 0.009369 72.21280 0.0000


R-squared 0.992955 Mean dependent var 4.34E+10
Adjusted R-squared 0.992764 S.D. dependent var 2.05E+10
S.E. of regression 1.75E+09 Sum squared resid 1.13E+20
F-statistic 5214.688 Durbin-Watson stat 1.156784
Prob(F-statistic) 0.000000 Second-Stage SSR 1.13E+20


INTERPRETATION:
The coefficient of gdp (Yt) is positive and small, i.e. gdp has a significant positive relation with
consumption (consp). The value of R2 is very high, indicating all the relevant variables are been in the
equation.

It = v1 + v2 Yt + v3 Rt

Dependent Variable: INVST
Method: Two-Stage Least Squares
Date: 05/15/14 Time: 20:02
Sample (adjusted): 2004 2011
Included observations: 8 after adjustments
Instrument list: GDP INT


Variable Coefficient Std. Error t-Statistic Prob.


C 2.04E+08 8.12E+09 0.025089 0.9810
GDP 0.027766 0.077311 0.359147 0.7342
INT 2.09E+08 2.83E+08 0.737377 0.4940


R-squared 0.099752 Mean dependent var 3.04E+09
Adjusted R-squared -0.260347 S.D. dependent var 1.80E+09
S.E. of regression 2.02E+09 Sum squared resid 2.04E+19
F-statistic 0.277013 Durbin-Watson stat 0.868142
Prob(F-statistic) 0.768963 Second-Stage SSR 2.04E+19


INTERPRETATION:
The relationship of gdp and investment is positive but insignificant. Also the interest rate (int) has a
positive relation, with small coefficient but insignificant. That is, investment is not been determined by
the variables specified in the equation. The value of R2, hence, shows that the equation is missing some
important variables; as R2 is extremely less.

Yt = Ct + It + Gt

Dependent Variable: GDP
Method: Two-Stage Least Squares
Date: 05/15/14 Time: 20:05
Sample: 1973 2011
Included observations: 39
Instrument list: CONSP INVST GOVT


Variable Coefficient Std. Error t-Statistic Prob.


C -2.99E+09 1.44E+09 -2.071776 0.0457
CONSP 1.382258 0.047279 29.23608 0.0000
INVST 0.230274 0.459619 0.501011 0.6195
GOVT 0.004444 0.002767 1.605939 0.1173


R-squared 0.993683 Mean dependent var 5.86E+10
Adjusted R-squared 0.993142 S.D. dependent var 3.02E+10
S.E. of regression 2.50E+09 Sum squared resid 2.20E+20
F-statistic 1835.242 Durbin-Watson stat 0.909394
Prob(F-statistic) 0.000000 Second-Stage SSR 2.20E+20



INTERPRETATION:
Consumption (Ct) has a positive significant relation with gdp, but the coefficient of consumption is small.
However, investment and government expenditure have an insignificant relationship with gdp. The
value of R2 is high, indicating that the equation is good as it has all important variables.