APPENDIX 3: MODEL DIAGNOSTIC TESTS

APPENDIX 3: MODEL DIAGNOSTIC TESTS
Multicollinearity tests
DLTTOUT(
LATG
LMP(-1)
LPT(-1)
SQ(-1)
T
-1)
DLTTOUT
1.000000
-
-0.014230 0.271366
-0.031857 0.101407
(-1)
0.08036 0
LATG
-0.080360 1.00000 0.172051 0.125280
-0.151453 0.177906 0
LMP(-1)
-0.014230 0.17205 1.000000 0.547813
-0.160267 0.586007 1
LPT(-1)
0.271366 0.12528 0.547813 1.000000 0.042621 0.070126 SQ 0.042621 1.000000
-0.558291 0.15145 T 0.17790 0.586007 0.070126
-0.558291 1.000000

6
Heteroskedasticity test results
Heteroskedasticity Test ARCH
F-statistic
0.030076
Prob. F(1,31)
0.8634
Obs*R-squared
0.031985
Prob. Chi-Square(1)
0.8581 38

Test Equation:
Dependent Variable RESID^2
Method: Least Squares
Date: Time Sample (adjusted 1983 Included observations 33 after adjustments
Variable
Coefficient Std. Error t-Statistic
Prob.
C
0.025691 0.007744 3.317610 0.0023
RESID^2(-1)
0.033452 0.192889 0.173424 0.8634
R-squared
0.000969
Adjusted R-squared
-0.031258
S.E. of regression
0.036177
Sum squared resid
0.040572
Log likelihood
63.74448
F-statistic
0.030076
Prob(F-statistic)
0.863446
Mean dependent var
0.026472
S.D. dependent var
0.035625
Akaike info criterion
-3.742090
Schwarz criterion
-3.651392
Hannan-Quinn criter.
-3.711573
Durbin-Watson stat
1.864713

Model misspecification test results
Ramsey RESET Test
Equation: EQ02
Specification: DLTOUT C DLTOUT(-1) LPT(-1) LATG LMP(-1)
SQ(-1) T T 39

Omitted Variables Squares of fitted values
Value df
Probability t-statistic
0.758031 25 0.4555
F-statistic
0.574611
(1, Likelihood ratio 1
0.3794
F-test summary:
Sum of
Mean
Sq.
df
Squares
Test SSR
0.019629 Restricted SSR
0.873652 26 Unrestricted SSR
0.854023 25 Unrestricted SSR
0.854023 25 LR test summary:
Value df
Restricted LogL
14.00047 Unrestricted LogL
14.38678 25

Unrestricted Test Equation:
Dependent Variable DLTOUT
Method: Least Squares
Date: Time Sample 1982 2015 40

Included observations 34
Coefficien
Variable t
Std. Error t-Statistic
Prob.
C
2.069391 0.435345 4.753448 0.0001
DLTOUT(-1)
-0.237244 0.144723
-1.639293 0.1137
LPT(-1)
0.110264 0.055036 2.003472 0.0561
LATG
0.234045 0.139915 1.672762 0.1068
LMP(-1)
-0.387430 0.090218
-4.294357 SQ 0.165272
-0.017478 T 0.021594
-1.542775 T 0.001236 0.000510 2.422569 FITTED 0.742952 0.980108 0.758031 0.4555
R-squared
0.563423
Mean dependent var
0.029803
Adjusted R-squared
0.423719
S.D. dependent var
0.243471
S.E. of regression
0.184827
Akaike info criterion -Sum squared resid
0.854023
Schwarz criterion
0.087167
Log likelihood
14.38678
Hannan-Quinn criter. -0.179081
F-statistic
4.032963
Durbin-Watson stat
1.968880
Prob(F-statistic)
0.003414

Normality test results
41

8 7
6 5
4 3
2 1
0
-0.3
-0.2
-0.1 0.0 0.1 0.2 0.3
APPENDIX 4: OLS Regression Results
Dependent Variable DLTOUT
Method: Least Squares
Date: Time Sample (adjusted 1982 Included observations 34 after adjustments
Variable
Coefficient Std. Error t-Statistic
Prob.
C
1.929820 0.391252 4.932425 0.0000
DLTTOUT(-1)
-0.266044 0.138500
-1.920897 0.0658
LATG
0.265710 0.132437 2.006307 0.0553
LMP(-1)
-0.355482 0.079114
-4.493306 0.0001
LPT(-1)
0.117526 0.053751 2.186495 SQ 0.163541 0.034003 T 0.021402
-1.584023 T 0.001246 0.000506 2.464107 0.0207 42

Series Residuals Sample 1982 2015 Observations 34
Mean
2.06e-16
Median
-0.008632
Maximum
0.345554
Minimum
-0.320495
Std. Dev.
0.162709
Skewness
0.165686
Kurtosis
2.839206
Jarque-Bera
0.192188
Probability
0.908378

R-squared
0.553389
Adjusted R-squared SE. of regression
0.183308
Sum squared resid
0.873652
Log likelihood
14.00047
F-statistic
4.602312
Prob(F-statistic)
0.001858
Mean dependent var
0.029803
S.D. dependent var
0.243471
Akaike info criterion
-0.352969
Schwarz criterion
0.006175
Hannan-Quinn criter.
-0.230490
Durbin-Watson stat
1.860619

APPENDIX 5: LONG-RUN ELASTICITY FORMULA (NERLOVE; 1958)
Where;
LRε = long-run price elasticity of supply;
SRε = short-run price elasticity of supply = absolute coefficient of lagged output supplied

Given the OLS regression results in APPENDIX 4;

SRε = 0.117526
α =
0.266044
Hence;

= 0.1601267650922
43

44