19
4.3 Model Diagnostic Tests Results Table 4: Correlation Matrix Results Variable dln(TOUT
t-1
) ln(PT
t-1
) ln(MP
t-1
) ln(ATG
t
) SQ
t-1
T dln(TOUT
t-1
)
1 ln(PT
t-1
)
0.27 1 ln(MP
t-1
)
-0.01 0.54 1 ln(ATG
t
)
-0.08 0.12 0.17 1
SQ
t-1
-0.03 0.04
-0.16
-0.15 1 T
0.10 0.07 0.58 0.17
-0.55 1 Table 4 presents the correlation matrix showing the degree of linear association between a pair of regressors. The correlation coefficients are less than 0.8 implying that each variable’s effect on the dependent variable can easily be isolated. The model does not suffer from serious
problems of multicollinearity, therefore the OLS approach can be used for estimation.
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