Adf test, Macroeconomics

Assignment Help:

Table Summary of results from the ADF test

Test Number

Oil

GDP

Interest rate

Inflation

Unemployment

Exchange Rate

1

1.169921

-3.4819***

-2.35867**

-2.23904**

-0.98162

-1.05852

2

0.16054

-6.0342***

-1.7243***

-3.5581***

-2.15841

-2.40748

3

-3.72037*

-6.0839***

-2.795304

-3.62005**

-1.70094

-2.67032

***/**/* - Denotes that null hypothesis can be rejected at the 1%/5%/10% significance levels respectively.Figures condensed from Appendix tables 1A -> 1F.

From Table it can be seen that the variables; Oil, GDP, interest rate and inflation are all stationary and can reject the null hypothesis at the normal significance levels. The critical values for this test are those derived by James Mackinnon (1996). Therefore they do not contain unit roots. However for the remaining two variables -exchange rates and unemployment - the null hypothesis cannot be rejected at the normal significance levels.Therefore it is confirmed that these variables are not stationary and do contain a unit root. According to Kennedy (2001) this means that the regressions for these variables will be spurious meaning that these regressions are likely to show a very high  value, indicating a strong goodness of fit. Also it might show t-statistics which deem that the coefficients are significant. However, these results may not have any economic significance at all.


Related Discussions:- Adf test

Money market with inflation and rising money supply, Q. Money market with i...

Q. Money market with inflation and rising money supply? Figure: The money market with inflation and rising money supply If we let π M refer the growth rate in money

Combination price of capital decreased, In reference to the above question,...

In reference to the above question, assume you know the combination of inputs that minimizes cost. What would happen to this input combination if the price of labor increased? What

OPEN ECONOMY, EXPLAIN THE 5 SECTOR MODEL (OPEN ECONOMY) IN INCOME DETERMINA...

EXPLAIN THE 5 SECTOR MODEL (OPEN ECONOMY) IN INCOME DETERMINATION

Groth model, what role does interst rate play in refernce to output?

what role does interst rate play in refernce to output?

What is the price elasticity of supply, What is the price elasticity of sup...

What is the price elasticity of supply? Price elasticity of supply: The price elasticity of supply is a measure of the receptiveness of the quantity of a good supplied to pr

How to calculate inflation rate, Assume the residents of an economy spend a...

Assume the residents of an economy spend all of their income on cauliflower, broccoli and carrots. In 2003 they buy100 heads of cauliflowers for Rs. 200; 50 bunch of broccoli f

Assumptions of the AS-AD model, Q. Assumptions of the AS-AD model? The ...

Q. Assumptions of the AS-AD model? The most significant change we make going from IS-LM model to AS-AD model is to allow P to be endogenous. As P was constant in IS-LM model, w

Var modelling, However, these results should be approached with due caution...

However, these results should be approached with due caution. The limitations and problems associated with VAR modelling have been outlined in this paper, therefore these observati

Classical model, using a graph of the classical labour market,illustrate th...

using a graph of the classical labour market,illustrate the effects of a real wage existing in the market that is lower than the equilibrium real wage.What will eventually happen i

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd