Stationarity of Time Series and the Problem of Spurious Regression

Baumöhl, Eduard; Lyócsa, Štefan

doi:10.2139/ssrn.1480682

Cited by 20 publications

(20 citation statements)

References 17 publications

(11 reference statements)

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…When it comes to quantifying transport infrastructure implications on the economic growth, the studies highlighted the specific inputs and outputs, being simpler to choose the variables involved. As can be seen in Appendix A, Table A1 follow the literature [98,99], we use GDP per capita based on purchasing power parity (PPP) as a dependent variable. Even if most studies use GDP at market prices (euro per capita), given the distribution of these variables and the implication on the viability of model, the chosen variable is better for provide an adequate measure of economic growth.…”

Section: Sample and Variablesmentioning

confidence: 99%

“…To test the validity of a regression, the literature indicates the need to check if it is stationary or not by the Augmented Dicky Fuller (henceforth "ADF"). If it is stationary, it is indicated to work with the differences or logarithms of the series and if it is seasonal it is necessary to use moving averages or to log of the series [4,16,98,99]. In order to eliminate the problem of spurious regression or the existing non-linear relationship between the independent and dependent variables and to achieve a normal distribution of variables, some of the variables (except Index_Transport for example), were logarithmically transformed (see Table A2).…”

Section: Sample and Variablesmentioning

confidence: 99%

See 1 more Smart Citation

Transport Infrastructure Development, Public Performance and Long-Run Economic Growth: A Case Study for the Eu-28 Countries

et al. 2018

View full text Add to dashboard Cite

This paper examines the link between the transport infrastructure and the economic performance in the EU-28 countries, over the period of time 2000–2014, using panel data methods. Firstly, we aim to provide the theoretical background of the transport infrastructure development, public sector performance and economic growth. The paper's key point is the detailed look at the components of transport infrastructure, analyzing the implications of the policy-makers based on a production function and in order to test the policy implication, factor analysis is also employed. The results show significant effects from transport infrastructure components even after institutional and other factors are controlled for. From the path analysis results, the study conﬁrm the alternative hypothesis, outlining the unidirectional long-run causality relationship between growth, transport infrastructure and Public Sector Performance. Transport infrastructure status (measured thought index of transport) has significant impact on economic development with coefficient estimate. The public performance indicators influence the way to economic growth. On the one hand, the corruption, the regulatory environment, size shadow economy, infant mortality, income inequality, inflation and unemployment rate negatively affect the economic growth, and on the other hand there is a strong positive relationship between the quality of the judiciary, education achievement, life expectancy and economic growth.

show abstract

Section: Sample and Variablesmentioning

confidence: 99%

Section: Sample and Variablesmentioning

confidence: 99%

Transport Infrastructure Development, Public Performance and Long-Run Economic Growth: A Case Study for the Eu-28 Countries

et al. 2018

View full text Add to dashboard Cite

show abstract

“…In conducting a unit root test, Baumöhl and Lyócsa (2009) argued that providing results of at least two tests is a convention in economic literature. Most frequently ADF, Phillips-Perron (PP) test, and Kwiatkowski-Phillips-Schmidt-Shin (KPSS) test are used, and are also incorporated into the majority of statistical or econometric software.…”

Section: Unit Root Testmentioning

confidence: 99%

“…Most frequently ADF, Phillips-Perron (PP) test, and Kwiatkowski-Phillips-Schmidt-Shin (KPSS) test are used, and are also incorporated into the majority of statistical or econometric software. However, since KPSS includes a transposed null hypothesis, which identifies a dataset as stationarity against alternative of a unit root, the results of this test could be mixed (Baumöhl and Lyócsa 2009). Thus, the KPSS test was not included in this study; rather, a modified Dickey-Fuller (DF) unit root test transformed via a generalized least squares (GLS) regression that was proposed by Elliott et al (1996) was used: the DF-GLS test.…”

Section: Unit Root Testmentioning

confidence: 99%

Modeling the Construction Sector and Oil Prices toward the Growth of the Nigerian Economy: An Econometric Approach

2018

View full text Add to dashboard Cite

This study empirically examined the interrelationship between the construction sector, oil prices, and the actual gross domestic product (GDP) in Nigeria. Using annual economic data from the National Bureau of Statistics (NBS), the OPEC Annual Statistical Bulletin, and econometric statistics, we found that although very strong positive and significant correlations exist between the construction sector output and total GDP output (0.934), the construction sector output and oil prices (0.856), and the total GDP output and oil prices (0.822), these linear relationships only exist for a short time. However, these relationships do not result in any direct causal influence on each other, except for the uni-directional Granger causal relationship that flows from the total GDP output to the construction sector output, which implies that economic activities of other major non-oil sectors stimulate the construction activities in Nigeria. Thus, we argue that neither the construction sector nor the oil prices directly influence the aggregate economy; rather, the other sectors' activities stimulate the construction sector in Nigeria. Two policy recommendations for achieving the Federal Government's medium term Economic Recovery and Growth Plan (ERGP) are suggested: (1) the Nigerian government should de-emphasize overreliance on the oil sector through policy readjustment and (2) an urgent need for economic diversification in Nigeria exists, since we revealed that an increase in the aggregate GDP output is due to the activities of other non-oil sectors.

show abstract

“…However, the unusually high R 2 coefficient might be an indicator of a spurious regression, moreover when most of the variables are non-stationary at levels. Theory suggests that in case of spurious regression R 2 is greater than Durbin-Watson (DW) statistics ("rule of thumb"), and there is high risk of type I error, or false rejection of the null hypothesis βi=0 (Baumohl, Lyocsa, 2009). In this case DW statistics is around 2 (R 2 <DW), all CLRM assumptions are met, and the null hypothesis for the main parameter of interest (budget deficit) is not rejected anyway, so the selection of the OLS method as most appropriate can be considered as justified.…”

Section: Econometric Modelmentioning

confidence: 99%

Macroeconomic effects of the budget deficit in the Republic of Macedonia

Noveski

2018

Croatian Review of Economic, Business and Social Statistics

View full text Add to dashboard Cite

Although a decade has passed since the global financial and economic crisis of 2008, the expansionary fiscal policy in Macedonia can still be felt, primarily through an increased level of public expenditures aimed at stimulation of the economic growth. From 2008 onwards, the Republic of Macedonia has continuously recorded a negative budget balance, which affects the resources allocation and the overall economic situation. The question that arises is whether such interference by the Government in the functioning of the market economy is necessary, especially having in mind the EU regulation in this area. Using a multiple regression model for the period 1996-2015, this paper examines the impact of the budget deficit on Gross Domestic Product (GDP) per capita in Macedonia. Results show that the budget deficit is not a statistically significant determinant of GDP per capita, supporting thus the Ricardian equivalence theory. The analysis is conducted on the basis of statistical data from the World Bank’s database, as well as data from the National Bank of the Republic of Macedonia. Household final consumption expenditure, the unemployment rate and the official exchange rate of the Macedonian Denar against the U.S. Dollar are also taken into consideration as controlling variables. GDP per capita and household final consumption expenditures are in current prices, with natural logarithms applied, whereas the other variables are in nominal terms. The purpose of this paper is to provide an insight into the empirical relationship between the two main variables of interest and to initiate further discussion and analysis.

show abstract

Stationarity of Time Series and the Problem of Spurious Regression

Cited by 20 publications

References 17 publications

Transport Infrastructure Development, Public Performance and Long-Run Economic Growth: A Case Study for the Eu-28 Countries

Transport Infrastructure Development, Public Performance and Long-Run Economic Growth: A Case Study for the Eu-28 Countries

Modeling the Construction Sector and Oil Prices toward the Growth of the Nigerian Economy: An Econometric Approach

Macroeconomic effects of the budget deficit in the Republic of Macedonia

Contact Info

Product

Resources

About