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Dyt A+Bdxt+Cxt-1+Dyt-1+Ut D First Difference Procedure-1

1. The document describes an econometric analysis using time series data on GDP and savings in India from 1957 to 2017. 2. The analysis estimates several error correction models (ECMs) relating the change in the log of savings to the change and lagged level of the log of GDP and lagged residuals. 3. The estimated coefficients of the lagged dependent variables and residuals are negative and statistically significant, indicating the models re-equilibrate following deviations from the long-run relationship between GDP and savings.

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61 views2 pages

Dyt A+Bdxt+Cxt-1+Dyt-1+Ut D First Difference Procedure-1

1. The document describes an econometric analysis using time series data on GDP and savings in India from 1957 to 2017. 2. The analysis estimates several error correction models (ECMs) relating the change in the log of savings to the change and lagged level of the log of GDP and lagged residuals. 3. The estimated coefficients of the lagged dependent variables and residuals are negative and statistically significant, indicating the models re-equilibrate following deviations from the long-run relationship between GDP and savings.

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© © All Rights Reserved
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Econometric Analysis II Wednesday October 21 12:12:42 2020 Page 1

___ ____ ____ ____ ____(R)


/__ / ____/ / ____/
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Statistics/Data Analysis

User: Pulak Mishra


Project: ECM

1 . tsset time, yearly


time variable: time, 1 to 57 Setting data as time-series
delta: 1 year

2 . generate lngdp_con=ln(gdp_con) Natural logarithm of gdp_con


3 . generate lnsave_con=ln(save_con) Natural logarithm of save_con
4 . reg D.lnsave_con D.lngdp_con L.lngdp_con L.lnsave_con DYt=a+bDXt+cXt-1+dYt-1+ut
Procedure-1 D=First Difference
Source SS df MS Number of obs = 56
F( 3, 52) = 5.58 Statistically
Model .186063024 3 .062021008 Prob > F = 0.0021 significant model
Residual .578118468 52 .011117663 R-squared = 0.2435
Adj R-squared = 0.1998
Total .764181491 55 .013894209 Root MSE = .10544

D.lnsave_con Coef. Std. Err. t P>|t| [95% Conf. Interval]

lngdp_con Estimated
D1. .5344193 .5031591 1.06 0.293 -.4752433 1.544082 coefficient
of Yt-1 is
L1. .6914803 .1815722 3.81 0.000 .327129 1.055832
statistically
lnsave_con significant, negative
L1. -.4176128 .1097294 -3.81 0.000 -.637801 -.1974246
and its absolute
_cons -4.491856 1.206467 -3.72 0.000 -6.912809 -2.070903 value is less than
one. (-1<d-hat<0)
Indicates that the model re-equilibrates
5 . reg lnsave_con lngdp_con Model: Yt=a+bXt+ut
Procedure-2
Source SS df MS Number of obs = 57
F( 1, 55) = 4402.17
Model 77.1001849 1 77.1001849 Prob > F = 0.0000
Residual .963277274 55 .017514132 R-squared = 0.9877
Adj R-squared = 0.9874
Total 78.0634622 56 1.3939904 Root MSE = .13234

lnsave_con Coef. Std. Err. t P>|t| [95% Conf. Interval]

lngdp_con 1.628394 .0245429 66.35 0.000 1.579209 1.677579


_cons -10.50616 .3297599 -31.86 0.000 -11.16702 -9.84531

6 . predict u, res Generation of residual (u)


7 . reg D.lnsave_con D.L.lngdp_con L.u Estimation of Model: DYt=a+bDXt-1+dut-1+vt
Source SS df MS Number of obs = 55
F( 2, 52) = 8.02 Statistically
Model .173969514 2 .086984757 Prob > F = 0.0009 significant model
Residual .564134509 52 .010848741 R-squared = 0.2357
Adj R-squared = 0.2063
Total .738104022 54 .013668593 Root MSE = .10416
Econometric Analysis II Wednesday October 21 12:12:43 2020 Page 2

D.lnsave_con Coef. Std. Err. t P>|t| [95% Conf. Interval] Estimated

lngdp_con
coefficient of ut-1 is
LD. -.2027837 .4824606 -0.42 0.676 -1.170912 .7653444 statistically
significant, negative
u
L1. -.4414358 .1109608 -3.98 0.000 -.6640949 -.2187767 and its absolute
value is less than
_cons .0857005 .0257899 3.32 0.002 .0339493 .1374517 one. (-1<d-hat<0)

Indicates that the model re-equilibrates


8 . reg D.lnsave_con D.lngdp_con L.u Estimation of Model: DYt=a+bDXt+dut-1+vt
Source SS df MS Number of obs = 56
F( 2, 53) = 8.35 Statistically
Model .183039818 2 .091519909 Prob > F = 0.0007
Residual .581141673 53 .010964937 R-squared = 0.2395
significant model
Adj R-squared = 0.2108
Total .764181491 55 .013894209 Root MSE = .10471

D.lnsave_con Coef. Std. Err. t P>|t| [95% Conf. Interval] Estimated


coefficient of ut-1 is
lngdp_con
D1. .6326403 .4633582 1.37 0.178 -.2967386 1.562019 statistically
significant, negative
u
L1. -.41353 .1086954 -3.80 0.000 -.6315453 -.1955147
and its absolute
value is less than
_cons .0443988 .0252949 1.76 0.085 -.0063363 .0951339 one. (-1<d-hat<0)

Indicates that the model re-equilibrates


9 .

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