As an upcoming economist, you are interested in measuring the impact of foreign direct investment (FDI),...
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As an upcoming economist, you are interested in measuring the impact of foreign direct investment (FDI), gross fixed capital formation (GFCF) and employment (EMP) on economic growth. You construct a log-log model obtained using growth accounting specified below: LGDP₁= a +B₁LFDI+B₂LGFCF1+BaLEMP+EL Using Ordinary least squares, you obtain the following model; N=56 GDP = 1.18-0.35FDI+0.04GFCF,+ 3.2EMP Se = (0.09) (0.05) (0.008) (0.44) R²-0.78 i. Interpret the coefficients and R² 11. Determine if this model is significant using the appropriate test. [6Marks] [5 Marks] iii. Your output suggests that FDI has a negative impact on GDP growth. Conduct a test to determine if this is true at 5% level of significance [4 Marks] iv. What is your understanding of the error term in the model? Suggest a variable that can comprise the error term and why it could have been left out of the model. [5 Marks] Suggest two policy recommendation based on the results of your regression. [5 Marks] vi. State and explain under which assumptions your model is estimated. [15 Marks] As an upcoming economist, you are interested in measuring the impact of foreign direct investment (FDI), gross fixed capital formation (GFCF) and employment (EMP) on economic growth. You construct a log-log model obtained using growth accounting specified below: LGDP₁= a +B₁LFDI+B₂LGFCF1+BaLEMP+EL Using Ordinary least squares, you obtain the following model; N=56 GDP = 1.18-0.35FDI+0.04GFCF,+ 3.2EMP Se = (0.09) (0.05) (0.008) (0.44) R²-0.78 i. Interpret the coefficients and R² 11. Determine if this model is significant using the appropriate test. [6Marks] [5 Marks] iii. Your output suggests that FDI has a negative impact on GDP growth. Conduct a test to determine if this is true at 5% level of significance [4 Marks] iv. What is your understanding of the error term in the model? Suggest a variable that can comprise the error term and why it could have been left out of the model. [5 Marks] Suggest two policy recommendation based on the results of your regression. [5 Marks] vi. State and explain under which assumptions your model is estimated. [15 Marks]
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Answer rating: 100% (QA)
i Interpretation of Coefficients and R The coefficient of FDI FDI is 035 This means that a 1 increase in FDI is associated with a 035 decrease in GDP growth holding other variables constant The coeffi... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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