Foreign Direct Investment And Economic Growth Economic theory suggests that foreign direct investment affect economic growth (the growth of the Gross Domestic Product (GDP)) in developing countries. The objective of this project is to carry out a simple linear regression analysis to examine this theory. Your independent and dependen


Foreign Direct Investment And Economic Growth

Economic theory suggests that foreign direct investment affect economic growth (the growth of the Gross Domestic Product (GDP)) in developing countries. The objective of this project is to carry out a simple linear regression analysis to examine this theory. Your independent and dependent variables are the growth of the foreign direct investment and the economic growth (the growth of the Gross Domestic Product (GDP)) respectively.

Required Tasks:

1. State the regression model and determine the least-squares regression line.

2. What sign did you expect the estimated parameter to have? Explain.

3. Use the scatter diagram presented in figure 1 to comment on whether it appears that a linear model might be appropriate.

Use the scatter diagram presented in figure 1 to comment onwhetherit appears that alinear model might be appropriate

4. Complete the table

Variable Coefficient Std. Error t-Statistic Prob.
C 0.825323 0.025088 …………. 0.0000
FDI 0.395143 ………… 79.13680 0.0000
R-squared 0.997928     Mean dependent var 2.799762
Adjusted R-squared 0.997769     S.D. dependent var 0.215471
S.E. of regression 0.010177     Akaike info criterion -6.213784
Sum squared resid 0.001346     Schwarz criterion -6.119377
Log-likelihood 48.60338     Hannan-Quinn criteria. -6.214790
F-statistic 6262.633     Durbin-Watson stat 2.011334
Prob(F-statistic) 0.000000

5. Write the regression line.

6. Conduct a test of the coefficient of correlation to determine at the 5% significance level whether FDI is related to the GDP, as the theory suggests.

7. Conduct a test of the regression slope to determine at the 5% significance level whether a positive and significant linear relationship exists between the two variables.

8. Does it appear that the error variable is normally distributed? Explain. (Refer to the Histogram of the residuals presented in figure 2.

Does it appear that the error variable isnormally distributed.

 

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