Peace Studies and International Development

Peace Studies and International Development

Answer All the Following Questions
Note that this is not an essay-type assignment. Please simply answer the questions one by one.
This assignment is based on the gross domestic investment demand equation. The suggested gross
domestic investment demand equation is formed as follows:
LRI LRY LR LEX t t t t t           Eq.(1)
LRI stands for the natural logarithm of real gross capital formation, LRY is the natural logarithm of
real gross domestic product, LR is the natural logarithm of nominal deposit interest rates or
lending interest rates, and LEX is the natural logarithm of the official exchange rate between the
home country and US$. APA.

Click Here To Receive Expert Guidance, Punctual Delivery,

and Customized Solutions For All Your Assignments.

Peace Studies and International Development

(i) [10 marks] Download annual data for the variables in eq.(1) from the World Bank data
bank for a country of your choice from 1960 to 2023 (or how long the sample period is
Faculty of Management, Law & Social
Sciences
School of Social Sciences
available in the databases). Ensure that you have at least 35 annual observations for
each variable. Using this data set, provide some descriptive statistics and graphs on
your logarithmic variables in eq.(1) and conclude appropriately.
(ii) [10 Marks] Implement ADF (Augmented Dickey-Fuller) and PP (Phillips-Perron) unitroot tests on LRI, LRY, LR and LEX variables and evaluate your results. Provide an
appropriate summary unit-root table and conclude appropriately.
(iii) [10 marks] Estimate the short-run and long-run models of eq. (1) by the ARDL
(Autoregressive Distributed Lag) approach to cointegration technique. Provide an
appropriate summary result table and conclude appropriately.
(iv) [10 marks] Test the validity of the OLS assumptions in stage (iii). Provide a summary
table for the results and conclude appropriately.

Peace Studies and International Development

(v) [10 marks] Interpret the econometric results from economic theory and statistical
points of view.
(vi) [10 marks] Implement multivariate Granger-causality analysis for eq.(1), summarise
your results on a table appropriately, and interpret your results.
(vii) [10 marks] Implement impulse response analysis for eq.(1), summarise your results on
a table appropriately and interpret your results.
(viii) [10 marks] Implement the Johansen cointegration test for eq.(1) and interpret your
results.
(ix) [10 marks] Implement a vector error-correction model (VECM) for eq.(1) and interpret
your results.
(x) [10 marks] Using the appropriate econometric results, provide policy
recommendations for the country.