Journal of Emerging Trends in Economics and Management Sciences (JETEMS) 6(1):13-21

Scholarlink Research Institute Journals, 2015 (ISSN: 2141-7024)

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Journal of Emerging Trends in Economics and Management Sciences (JETEMS) 6(1):13-21 (ISSN: 2141-7016)

Impact of Exports and Imports on Economic Growth:

Evidence from Tunisia

Afaf Abdull J. Saaed and Majeed Ali Hussain

Associate Professor of Applied Economics, College of Business Administration

American University in the Emirates, United Arab Emirates
Associate Professor of Econometrics, College of Business Administration
American University in the Emirates, United Arab Emirates
Corresponding Author: Afaf Abdull J. Saaed
________________________________________________________________________________________
Abstract
In this paper we investigated the impact of exports and imports on the economic growth of Tunis over the period
1977-2012. The study used Granger Causality and Johansen Cointegration approach for long run relationship
Using Augmented Dickey-Fuller (ADF) and Phillip-Perron (PP) stationarity test, the variable proved to be
integrated of the order one 1(1) at first difference. Johansen and Juselius Cointegration test was used to
determine the presence or otherwise of a cointegrating vector in the variables. To determine the direction of
causality among the variables, at least in the short run, the Pairwise Granger Causality was carried out.
Economic growth was found to Granger Cause import and Export was found to Granger Cause import. The
results show that there is unidirectional causality between exports and imports and between exports and
economic growth. These results provide evidence that growth in Tunisia was propelled by a growth -led import
strategy as well as export led import. Imports are thus seen as the source of economic growth in Tunisia.
__________________________________________________________________________________________
Keywords: Co integration, Granger causality; Exports; Imports; Economic growth;

INTRODUCTION additional relevant variable, imports. Second, this

It has been theoretically argued that both export and
import may play a crucial role in economic
development. The theoretical and empirical studies
mainly concentrate on either the relationship between
export and growth or between import and growth or
the association between export, import and economic
growth.
The export-led growth hypothesis (ELGH) assumes
that export advancement is one of the key indicators
of growth. It encourages that the overall progress of
countries can be achieved not only by mounting the
quantity of manpower and investment within the
economy, but also by increasing exports.
Another relationship of causality from growth to
export is called growth-led exports and it tells that
there is unidirectional causality from economic
growth to exports but not vice versa. There is also a
possibility of two way causality link from exports to
growth and from growth to exports.
This paper contributes to the literature in the
following ways. First, previous studies focus mainly
on the interactions between exports and economic
growth. Recognizing the role of imports on economic
growth and possibly on export activities of a country,
this paper empirically examine the relationship
between exports and economic growth in a
multivariate framework with the introduction of an
13
study will use cointegration test to investigate for the
presence of a long-run relationship. To investigate for
cointegrating relationship between exports and
economic growth, previous papers use mainly Engle
and Granger (1987), Johansen (1988) and Johansen
and Juselius (1990) approaches. However, this study
will test of the impact of exports and imports on the
economic growth of Tunis over the period 1977-
2012.
The aim of this paper, therefore, is to econometrically
investigate direct linkages among trade and economic
growth for Tunis. by employing yearly data for the
period 1977-2012. In particular, this work tries to
empirically find an answer for the question of
whether export leads economic growth or of whether
import lead economic growth or economic growth
leads export and import.
To achieve this objective the paper is structured as
follows. We discuss the Methodology, Model
Specification and Data used in this study in Section 3.
Section 4 presents the empirical results as well as the
analysis of the findings. Section 5 provides our
conclusion.
LITERATURE REVIEW THEORY AND
APPLICATION
The relationship between import, export and
economic, has been a subject matter for a substantial
Journal of Emerging Trends in Economics and Management Sciences (JETEMS) 6(1):13-21 (ISSN: 2141-7016)
body of empirical work. Their nexus is usually
investigated in the empirical literature in two
different lines: The first line of the existing empirical
research attempt to separately examine the
importance of export or import on economic growth,
the second line of the empirical works examines the
relationship between export and import collectively.
With regard to methods haven used to determine the
importance of export and/or import to economic
growth, there are two main methods. The first one
employs simple or multiple regressions, while the
second method employs the causality technique.
Recently, most of studies have attended to focus on
VAR and VEC models and cointegration approach.
Our review of literature is limited to studies that
focus on the joint impact of both export and import
on economic growth.
Yuhong,Li and et. al. (2010) did co-integration
analyses with the data of import, export and
economic, and the results suggests that growth of
import greatly promoted economic growth of China,
while that of export performed an opposite one.
Asafu-Adjaye et al (1999) consider three variables:
exports, real output and imports (for the period 1960-
1994). They do not find any evidence of the existence
of a causal relationship between these variables for
the case of India and no support for the ELG
hypothesis, which is not too surprising given Indias
economic history and trade policies
Ullah et al (2009) investigated Export-led-growth by
time series econometric techniques (Unit root test,
Co-integration and Granger causality through Vector
Error Correction Model) over the period of 1970 to
2008 for Pakistan. In this paper, the results reveal that
export expansion leads to economic growth. They
also checked whether there is uni-directional or
bidirectional causality between economic growth,
real exports, real imports, real gross fixed capital
formation and real per capita income. The traditional
Granger causality test suggests that there is uni-
directional causality between economic growth,
exports and imports. On the other hand Granger
causality through vector error correction was checked
with the help of F-value of the model and t-value of
the error correction term, which partially reconciles
the traditional Granger causality test.
Vohra (2001) tested the relationship between the
export and growth in India, Pakistan, the Philippines,
Malaysia, and Thailand for 1973 to 1993. The
empirical results indicated that when a country has
achieved some level of economic development than
the exports have a positive and significant impact on
economic growth. The study also showed the
importance of liberal market policies by pursuing
export expansion strategies and by attracting foreign
investments.
14
Carbajal, Canfield and De la Cruz (2008) examined
both the existence of causality, in the Granger Sense,
and its direction between Gross Domestic Product
(GDP), Exports, Imports and Foreign Direct
Investment in Mexico (FDI).
Wong, (2008) examined the importance of exports
and domestic demand to economic growth in
ASEAN-5, namely Indonesia, Malaysia, the
Philippines, Singapore and Thailand before Asia
financial crisis, 1997- 1998. The results of the
Granger causality test show some evidence of
bidirectional Granger causality between exports and
economic growth. A successful sustained economic
growth requires growth in both exports and domestic
demand. Moreover, economic growth will increase
domestic demand and exports. There is no strong
evidence to suggest that the export-led growth (ELG)
strategy is a main cause to Asia financial crisis
Ramos (2002) investigated the Granger-causality
between exports, imports, and economic growth in
Portugal over the period 1865-1998. The role of the
import variable in the investigation of exports output
causality is emphasized, enabling one to test for the
cases direct causality, indirect causality, and spurious
causality between export growth and output growth.
The empirical results do not confirm a unidirectional
causality between the variables considered. There is a
feedback effect between exports output growth and
imports output growth. More interestingly, there is no
kind of significant causality between import export
growths. Both results seem to support the conclusion
that the growth of output for the Portuguese economy
during that period revealed a shape associated with a
small dual economy in which the intra-industry
transactions were very limited.
Yuhong Li, Zhongwen Chen & Changjian San
(2010), Research on the Relationship between
Foreign Trade and the GDP Growth of East China.
Empirical Analysis Based on Causality, Modern
Economy.
Hussain M and Saaed A.(2014) examined the nexus
of Exports, Imports and Economic growth in Saudi
Arabia, using annual data for the period 1990- 2011.
Granger Causality and Cointegration test were
employed in the empirical analysis. Both Trace and
Maximum Eigenvalue indicated cointegration at 5%
level of significance pointing to the fact that the
variables have a long-run relationship. Also,
economic growth was found to Granger Cause
import. There was a unidirectional causality existing
between export and import. But the result of the
causation between Exports and economic growth and
imports and economic growth was statistically
insignificant.
Journal of Emerging Trends in Economics and Management Sciences (JETEMS) 6(1):13-21 (ISSN: 2141-7016)
Hussain M.(2014) examines the relationship between
exports and GDP in Pakistan using, annual data
collected from 1976 to 2011. Co integration and
Granger causality test were employed in the
empirical analysis, using Augmented Dickey Fuller
stationarity test, the variable proved to be integrated
of the order one (1) at first difference. The paper is
based on the following hypotheses for testing the co -
integration and causality between GDP and export as
to whether there is short run causality between GDP
and export or whether there exists a long run
association hip between GDP and Export. The co
integration test indicating an existence of long run
equilibrium relationship between the two as
confirmed by the Johansen cointegration test results.
The ECM estimates gave evidence that there is SR
causality coming from GDP to Export. The findings
indicate that there is unidirectional causality from
GDP to exports in Pakistan but not vice versa
Hatemi (2002) studied causality between export
growth and economic growth in Japan by performing
augmented Granger-causality tests using the
bootstrap simulation technique. The results show that
the Granger-causality is bidirectional, which means
the expansion of exports is an integral part of the
economic growth process in Japan. However, they
point to a causal relationship between international
trade and exports and economic growth.
Finally and crucially, for the purpose of this paper,
the strong correlations of export, import and GDP
growth rates has nothing to say about a relationship
between the export (import) and the GDP trend
development, as it may arise from a purely short-run
relationship. In order to test for the existence of a
long-run relationship among GDP, exports and
imports, the theory of cointegration developed by
Engle and Granger (1987). Johansen (1988) and
Stock and Watson (1988), among others, has to be
applied. To this end, we analyze annual data for
Pakistan using a vector autoregressive (VAR)
framework.
DATA, METHODOLOGY AND MODEL
SPECIFICATION
The Data
The analysis used in this study cover annual time
series of 1977 to 2012 or 36 observations which
should be sufficient to capture the short run and long
run correlation between Export, Import and economic
growth in the model.
The data set consists of observation for GDP, exports
of goods and services (current US$), and imports of
goods and services (current US$). All data set are
taken from World Development Indicators 2014.
15
The estimation methodology employed in this study
is the cointegration and error correction modeling
technique. The entire estimation procedure consists
of five steps: first, unit root test; second,
cointegration test; third, the error correction model
estimation, forth Granger Causality and fifth VAR
stability model.
Model Specification
This study examines the causal relationship among
Economic growth, Export and Import, in Tunis.
Granger-causality test in Vector Error Correction
Model (VECM) framework is employed to examine
causal relationship among Economic growth, Export
and Import in Tunis.
The primary model showing the causal relationship
among Economic growth, Export and Import in Tunis
can be specified thus:
GDPt=f (export, import)
(1)
The function can also be represented in a log-linear
econometric format thus:
LGDPt= + Lexportt +1 Limportt + t
(2)
Where:
LGDP=LogGDP is economic growth as a proxy for
Gross Domestic Product
Lexport=LogEx .
Limport=LogIm .
is the constant term, t is the time trend, and is
the random error term assumed to be normally,
identically and independently distributed. Here,
GDPt, EXt and show the Gross Domestic Product
export and import at a particular time respectively
while t represents the noise or error term; and 1
and 2 represent the slope and coefficient of
regression. The coefficient of regression, 1 and 2
indicates how a unit change in the independent
variable (export and import) affects the dependent
variable (gross domestic product). The error, t, is
incorporated in the equation to cater for other factors
that may influence GDP. The validity or strength of
the Ordinary Least Squares method depends on the
accuracy of assumptions. In this study, the Gauss-
Markov assumptions are used and they include; that
the dependent and independent variables (GDP
,EXPORT and IMPORT) are linearly co-related, the
estimators (, 1 and 2 ) are unbiased with an
expected value of zero i.e., E (t) = 0, which implies
that on average the errors cancel out each other. The
procedure involves specifying the dependent and
independent variables; in this case, GDP is the
dependent variable while EXPORT and IMPORT are
the independent variable.
The paper is based on the following hypotheses for
testing the causality and co-integration between GDP,
Ex and IM.
(i) whether there is bi-directional causality
between GDP growth and export and Import,
Journal of Emerging Trends in Economics and Management Sciences (JETEMS) 6(1):13-21 (ISSN: 2141-7016)

(ii) whether there is unidirectional causality autoregressive and distributed lag structures in the
between the three variables, estimable VAR model. Therefore, lag of 1is used for
(iii) whether there is no causality between GDP estimation purpose.
and export and import in Tunis,
(iv) whether there exists a long run relationship Table: 1 Unit Root Tests (ADF, PP) on LGDP,
between GDP and EX and IM in Tunis. Lexport and Limport :1977-2012
Variables ADF PP Order of
EMPIRICAL ANALYSIS integration
Tests for Integration Level Level
This involves testing the order of integration of the LGDP 0 0.3216 0.2151 I(1)
0.0023*** 0.0026***
individual series under consideration. Several Lexport 0.5231 0.7329 I(1)
procedures for the test of order of integration have 0.0002*** 0.0001***
been developed. The most popular ones are Limport 0.1668 0.1142 I(1)
Augmented Dickey-Fuller (ADF) test due to Dickey 0.0003*** 0.0003***
and Fuller (1979, 1981), and the Phillip-Perron (PP) Note: (1) *** denotes significant at 1% level
due to Phillips (1987) and Phillips and Perron (1988). respectively. and in PP test it is based on Newey-
Augmented Dickey-Fuller test relies on rejecting a West using Bartlett kernel
null hypothesis of unit root (the series are non- Source: Eviews version 8.
stationary) in favor of the alternative hypotheses of
Table 2: Lag Order Selection
stationarity. The tests are conducted without
Criteria
adeterministic trend for each of the series.
Lag LogL LR FPE AIC SC HQ
At first this is important to know about the stationary 0 25.70744 NA 5.48e-05 -1.297568-1.164252 -1.251547
properties of variables. Therefore, unit root tests -
applied to examine the null hypothesis of having unit 1 142.3097 206.5526* 1.17e-07* -7.446269* -6.913007* 7.262187*
root 2 146.8471 7.259837 1.54e-07 -7.191263 -6.258055 -6.869120
3 152.4515 8.006324 1.93e-07 -6.997231 -5.664075 -6.537026
This involves testing the order of integration of the * indicates lag order selected by the criterion
LR: sequential modified LR test statistic (each test at 5%
individual series under consideration. Several level)
procedures for the test of order of integration have FPE: Final prediction error
been developed. The most popular ones are AIC: Akaike information
Augmented Dickey-Fuller (ADF) test due to Dickey criterion
and Fuller (1979, 1981), and the Phillip-Perron (PP) SC: Schwarz information
criterion
due to Phillips (1987) and Phillips and Perron (1988).
HQ: Hannan-Quinn information criterion
Augmented Dickey-Fuller test relies on rejecting a
Source: Eviews version 8
null hypothesis of unit root (the series are non-
stationary) in favor of the alternative hypotheses of
The Error Correction Model
stationarity. The tests are conducted with intercept for
If cointegration is proven to exist, then the third step
each of the series. The general form of ADF test is
requires the construction of error correction
estimated by the following regression
n
mechanism to model dynamic relationship. The
purpose of the error correction model is to indicate
t =o +1t1 +it1 +i (3)
the speed of adjustment from the short-run
i=1
equilibrium to the long-run equilibrium state. The
greater the co-efficient of the parameter, the higher
Y is a time series, t is a linear time trend, is the first
the speed of adjustment of the model from the short-
difference operator, o is a constant, n is the optimum
run to the long-run We represent equation (2) with an
number of lags in the dependent variable and e is the
error correction form that allows for inclusion of
random error term; and the Phillip-Perron (PP) is
equation is thus: long-run information thus, the Error Correction
Model (ECM) can be formulated as follows;
t = + n n n

t =oGDP
GDP ti +1exportti + 2import
ti +1EC1t1 +1t (5)
t 1 + t (4) i=1 i1 i1

The results of Table 1 show that all variables are non-
stationary in levels, but stationary in first difference.
Since the variables are 1(1) the next step is to test if
they are cointegrated using the Johansen full
information maximum likelihood. It is clear from
Table 2 that LR, FPE, AIC, SC, HQ and HQ statistics
are chosen lag 1for each endogenous variable in their
16
where is the difference operator; n, is the numbers
of lags, 1 2 are short run coefficients to be
estimated, EC1ti-i represents the error correction term
derived from the long-run co integration relationship
and 1t the serially uncorrelated error terms in
equation (5). Table 5 shows that the result did not
Journal of Emerging Trends in Economics and Management Sciences (JETEMS) 6(1):13-21 (ISSN: 2141-7016)

conform to our prior expectation. The adjustment behavior of Export and Import have positive
coefficient or the speed of adjustment of GDP is relationship in adjusting to long-run disequilibrium
deviated from its long run equilibrium is EC term given the ECM value and are statistically not
0.018721 and P-value is 0.8695 (see appendix A1) significant. Thus, in the long run, the null hypothesis
greater than 0.05 level of significant. Also the error is not rejected for all explanatory variables
correction estimate equation shows that the long run
Method: Least Squares
Sample (adjusted): 1978 2012
Included observations: 35 after adjustments
D(LGDP) = C(1)*( LGDP(-1) + 2.5201138114*LEXP(-1) -
3.27375312934*LIMP(-1) - 6.1705633084 ) + C(2)*D(LGDP(-1)) +
C(3)*D(LGDP(-2)) + C(4)*D(LEXP(-1)) + C(5)*D(LEXP(-2)) +
C(6)*D(LIMP(-1)) + C(7) *D(LIMP(-2)) + C(8)

Coefficient Std. Error t-Statistic Prob.

C(1) 0.018721 0.112896 0.165826 0.8695
C(2) 0.202587 0.211243 0.959025 0.3461
C(3) -0.103302 0.227235 -0.454602 0.6530
C(4) 0.173745 0.316506 0.548945 0.5876
C(5) -0.192307 0.250768 -0.766870 0.4498
C(6) -0.187897 0.282502 -0.665117 0.5116
C(7) 0.281967 0.229706 1.227510 0.2302

C(8) 0.046553 0.036245 1.284381 0.2099

R-squared 0.123807 Mean dependent var 0.062308
Adjusted R-squared -0.103354 S.D. dependent var 0.074353
S.E. of regression 0.078100 Akaike info criterion -2.064011
Sum squared resid 0.164691 Schwarz criterion -1.708503
Log likelihood 44.12020 Hannan-Quinn criter. -1.941290
F-statistic 0.545020 Durbin-Watson stat 2.060426
Prob(F-statistic) 0.792705
Source: Eviews version 8
Table 5: Result of Granger Causality
Granger Causality Results Pairwise Granger Causality Tests
Since there is cointegration between the variables, the Date: 01/17/15 Time: 15:01
next step is to test for the direction of causality using Sample: 1975 2012
the vector error correction model (VECM). The Lags: 2
presence of a cointegrating vector allows for the use
Null Hypothesis: Obs F-Statistic Prob.
of a vector error correction model to test causality.
The results of the Granger causality test are presented LEXP does not
in Table 5 shows that the economic growth led to Granger Cause LGDP 36 0.79877 0.4589
import. It is shown that economic growth Granger LGDP does not Granger Cause
LEXP 1.52459 0.2336
causes import. Also export granger causes import in
Tunis. The results show that there is bi-directional LIMP does not
Granger Cause LGDP 36 0.73490 0.4877
causality between exports and imports and between LGDP does not Granger Cause
economic growth and import but export does not LIMP 4.21667 0.0240
Granger cause GDP. The coefficient of the lagged LIMP does not
error correction term for all models is positive and Granger Cause LEXP 36 1.35081 0.2739
not significant and this implies that there is no long- LEXP does not Granger Cause
run causal relationship between exports and LIMP 6.93138 0.0032
economic growth in Tunisia. These results provide Source: Eviews version 8
evidence that growth in Tunisia was propelled by a
growth -led import strategy. Imports are thus seen as Finally, we have to check the model efficiency,
the source of economic growth in Tunisia. whether the model has ARCH affect, histogram-
normal, serial correlation and heterscedasticity. First
we check for histogram-normal, if Probability = p-
value >0.05, meaning that the residual is normal, so
Jarque-Bera p-value=0.770 which is greater than
0.05,meaning that the residual is normally

17
Journal of Emerging Trends in Economics and Management Sciences (JETEMS) 6(1):13-21 (ISSN: 2141-7016)

distributed. Now we check for ARCH affect. We

found that R2 probability = p-value=0.2901 which is VAR Stability
greater than 0.05, meaning that we cannot reject HN, To confirm the stability of the estimated model, the
rather accept HN, meaning that there is no ARCH tests of CUSUM and CUSUMSQ are employed in
affect. Now we check for serial correlation. We run this study. Figure 1 and 2 respectively provide the
the autoregressive model with the dependent variable graphs of CUSUM and CUSUMSQ tests. Figure
as independent variable with lag (-1), we find that the 1and 2 indicates that the plot of CUSUM is
model has no serial correlation, when obs R2, p- completely stable within 5% of critical bands
value =0.4029 which is greater than 0.05, we cannot indicating the stability of VAR parameters. The test
reject HN, rather accept HN, meaning that this model results show that the Modulus of all roots are less
does not have serial correlation. Finally, we check for than unity and lie within the unit circle. Accordingly
Heteroscedasticity we find that the model free from we can conclude that our model the estimated VAR is
heteroscedasticity when obsR2 corresponding to p- stable or stationary.
value=0.7533 greater than 0.05, meaning that the
residuals are free from Heteroscedasticity. (See
Appendix Table A3,A4 and A1 as well as figure A1).
Figure 1 Figure 2
16
1.4

1.2 12

1.0 8

0.8
4
0.6
0
0.4
-4
0.2
-8
0.0

-0.2 -12

-0.4 -16
86 88 90 92 94 96 98 00 02 04 06 08 10 12 86 88 90 92 94 96 98 00 02 04 06 08 10 12

CUSUM of Squares 5% Significance CUSUM 5% Significance

Note: The straight lines represent critical bounds at 5% significance level.

Figure 1 and 2. Plot of Cumulative Sum of Squares of Recursive CUSUMSQ Residuals and CUSUM
Source: Eviews version 8

CONCLUSION VAR stability show that the Modulus of all roots are
The aim of this study was to test Granger causality less than unity and lie within the unit circle.
between export, import and GDP growth of Tunis Accordingly we can conclude that our model the
during the period 1977-2012. The cointegration, error estimated VAR is stable or stationary.
correction model and Granger's causality tests are
applied to investigate the relationship between the The test of the model efficiency using Wald residuals
export, import and GDP The unit root properties of statistics found that the model has no ARCH affect,
the data were examined using the Augmented Dickey the residual is normally distributed and the model
Fuller test (ADF) after which the cointegration and does not have serial correlation and free from
causality tests were conducted. The error correction hetroscedasticity.
models were also estimated in order to examine the
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Journal of Emerging Trends in Economics and Management Sciences (JETEMS) 6(1):13-21 (ISSN: 2141-7016)

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APPENDIX A
Table A1:Wald Test:
Equation: Untitled

Test Statistic Value df Probability

F-statistic 0.677308 (2, 27) 0.5164

Chi-square 1.354617 2 0.5080

Null Hypothesis: C(4)=C(5)=0

Null Hypothesis Summary:

Normalized Restriction (= 0) Value Std. Err.

C(4) 0.173745 0.316506

C(5) -0.192307 0.250768

Restrictions are linear in coefficients.

Table A2: Wald Test:

Equation: Untitled

Test Statistic Value df Probability

F-statistic 1.219285 (2, 27) 0.3112

Chi-square 2.438570 2 0.2954

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Journal of Emerging Trends in Economics and Management Sciences (JETEMS) 6(1):13-21 (ISSN: 2141-7016)

Null Hypothesis: C(6)=C(7)=0

Null Hypothesis Summary:

Normalized Restriction (= 0) Value Std. Err.

C(6) -0.187897 0.282502

C(7) 0.281967 0.229706

Restrictions are linear in coefficients.

Figure A2:
7
Series: Residuals
6 Sample 1978 2012
Observations 35
5
Mean 5.39e-17
Median 0.003055
4 Maximum 0.159256
Minimum -0.134523
3 Std. Dev. 0.069598
Skewness 0.073052
2 Kurtosis 2.420648

Jarque-Bera 0.520617
1
Probability 0.770814

0
-0.15 -0.10 -0.05 0.00 0.05 0.10 0.15

Table A3:Breusch-Godfrey Serial Correlation LM Test:

F-statistic 0.684944 Prob. F(2,25) 0.5133

Obs*R-squared 1.818214 Prob. Chi-Square(2) 0.4029

Test Equation:
Dependent Variable: RESID
Method: Least Squares
Date: 01/21/15 Time: 23:02
Sample: 1978 2012
Included observations: 35
Presample missing value lagged residuals set to zero.

Variable Coefficient Std. Error t-Statistic Prob.

C(1) -0.017742 0.118662 -0.149514 0.8823

C(2) 0.736797 0.763495 0.965032 0.3438
C(3) -0.093649 0.588704 -0.159077 0.8749
C(4) 0.123791 0.339240 0.364908 0.7182
C(5) -0.063780 0.264374 -0.241248 0.8113
C(6) -0.110722 0.310785 -0.356267 0.7246
C(7) 0.106930 0.251563 0.425061 0.6744
C(8) -0.047445 0.078262 -0.606232 0.5498
RESID(-1) -0.815506 0.789282 -1.033225 0.3114
RESID(-2) -0.042032 0.668730 -0.062854 0.9504

R-squared 0.051949 Mean dependent var 5.39E-17

Adjusted R-squared -0.289349 S.D. dependent var 0.069598
S.E. of regression 0.079028 Akaike info criterion -2.003073
Sum squared resid 0.156136 Schwarz criterion -1.558687
Log likelihood 45.05377 Hannan-Quinn criter. -1.849671
F-statistic 0.152210 Durbin-Watson stat 1.995920
Prob(F-statistic) 0.997045

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Journal of Emerging Trends in Economics and Management Sciences (JETEMS) 6(1):13-21 (ISSN: 2141-7016)

Table A4: Heteroskedasticity Test: Breusch-Pagan-Godfrey

F-statistic 0.559193 Prob. F(9,25) 0.8168

Obs*R-squared 5.865124 Prob. Chi-Square(9) 0.7533
Scaled explained SS 2.479278 Prob. Chi-Square(9) 0.9814

Test Equation

Dependent Variable: RESID^2

Method: Least Squares
Date: 01/21/15 Time: 23:02
Sample: 1978 2012
Included observations: 35

Variable Coefficient Std. Error t-Statistic Prob.

C 0.140201 0.128419 1.091747 0.2854

LGDP(-1) 0.005139 0.016134 0.318497 0.7528
LEXP(-1) 0.002346 0.020172 0.116275 0.9084
LIMP(-1) 0.003188 0.025019 0.127403 0.8996
LGDP(-2) -0.012919 0.023257 -0.555479 0.5835
LGDP(-3) -0.002412 0.018235 -0.132250 0.8958
LEXP(-2) 0.017314 0.025909 0.668283 0.5101
LEXP(-3) 0.007524 0.021142 0.355880 0.7249
LIMP(-2) -0.007036 0.025369 -0.277361 0.7838
LIMP(-3) -0.018717 0.019071 -0.981443 0.3358

R-squared 0.167575 Mean dependent var 0.004705

Adjusted R-squared -0.132098 S.D. dependent var 0.005690
S.E. of regression 0.006055 Akaike info criterion -7.141056
Sum squared resid 0.000916 Schwarz criterion -6.696670
Log likelihood 134.9685 Hannan-Quinn criter. -6.987654
F-statistic 0.559193 Durbin-Watson stat 2.785236
Prob(F-statistic) 0.816836

Table A5:Heteroskedasticity Test: ARCH

F-statistic 1.089349 Prob. F(1,32) 0.3044

Obs*R-squared 1.119329 Prob. Chi-Square(1) 0.2901

Test Equation:
Dependent Variable: RESID^2
Method: Least Squares
Date: 01/21/15 Time: 23:03
Sample (adjusted): 1979 2012
Included observations: 34 after adjustments

Variable Coefficient Std. Error t-Statistic Prob.

C 0.005526 0.001279 4.320132 0.0001

RESID^2(-1) -0.181531 0.173927 -1.043719 0.3044

R-squared 0.032921 Mean dependent var 0.004679

Adjusted R-squared 0.002700 S.D. dependent var 0.005774
S.E. of regression 0.005766 Akaike info criterion -7.416649
Sum squared resid 0.001064 Schwarz criterion -7.326863
Log likelihood 128.0830 Hannan-Quinn criter. -7.386029
F-statistic 1.089349 Durbin-Watson stat 2.030607
Prob(F-statistic) 0.304437

21