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Applied Econometrics - United Kingdom & Brazil & Azerbaijan

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Applied Econometrics - United Kingdom & Brazil & Azerbaijan

  1. 1. Applied Econometrics: United Kingdom & Brazil & Azerbaijan “Tezer Yelkenci”
  2. 2. UNITED KINGDOM & BRAZIL & AZERBAIJAN
  3. 3. United Kingdom UNITEDKINGDOM First industrilized & still 6. largest economy in the world Izmir University of Economics ECON324 May 2011 The time series used in this study consist of quarterly observations for the period 1955-1972 The model is specified in continuous time as a system of stochastic differential equations. For economy of notation, the error terms are omitted and the model is described in deterministic form. If employment is below the level that the authorities wish to achieve, open market operations will be used to increase the volume of money and hence to decrease the interest rate and to increase investment; and, the aggregate of liquid assets and bonds held by banks would be determined by the wealth identity of the banking sector. Literature Review The UK is still the sixth largest economy in the world by purchasing power parity The British Economy is one of the most globalized economies in the world, mostly thanks to the city of London, being the largest financial center in the world.
  4. 4. BrazilBRAZIL World’s largest 8. economy but in several years will be fifth Izmir University of Economics ECON324 May 2011 They try to find out monetary transmission in an emerging targeter in terms of Brazil. Interest rate changes have swifter effects on output and inflation compared to advanced economies and that exchange rate dynamics plays a key role in this connection. Literature Review One of the countries which register in BRIC Has the world’s largest commercial cattle herd at 170 million head World's largest producer of sugarcane, coffee, tropical fruits, frozen concentrated orange juice.
  5. 5. AzerbaijanAZERBAIJAN Azerbaijan is an economy in transition where the state continues to play a dominant role. Izmir University of Economics ECON324 May 2011 They investigated the impact of government expenditure on growth with respect to Azerbaijan. They evaluate a fiscal scenario based on the assumption of a rapid scaling-up of expenditure to be followed by a rapid scaling-down in the context of Azerbaijan’s current temporary oil production boom. The results of the simulations of the Azerbaijan-specific model are similar to these lessons in many respects. Literature Review Annual growth exceeding 10% since 2000. Has important oil reserves and a significant agronomic potential based on a wide variety of climatic zones.
  6. 6. The ModelMODEL,METHODOLOGY&DATA Izmir University of Economics ECON324 May 2011 A Keynesian model of aggregate demand is estimated: Yt = COt + It + Gt +NXt COt = β0 +β1YDt +β2COt-1 +ε1t YDt =Yt - Tt It = β3 +β4Yt +β5rt-1 +ε2t  CO is consumption  Y is output  T is tax receipts  r is interest rate  I is investment  G is government spending  YD is disposable income  NX is net exports.
  7. 7. Methodology & DataMODEL,METHODOLOGY&DATA Izmir University of Economics ECON324 May 2011 We’ve extracted our data, which consists of annual values of the indicators, which are gross domestic product, household final consumption expenditure, gross capital formation, general government final consumption expenditure, merchandise exports and imports, interest rate, and net taxes on products for United Kingdom, Azerbaijan, and Brazil from World Development Indicators (WDI) 2010 ranging from 1999 to 2009. We calculated disposable income by extracting net taxes on products from gross domestic product, and net exports by extracting imports from exports. We estimated our equations by TSLS using the instruments: NX G COt-1 rt-1 T
  8. 8. United KingdomRESULTS Izmir University of Economics ECON324 May 2011 Dependent Variable: CO Instrument specification: CO(-1) T G NX R(-1) Coefficient Std. Error t-Statistic Prob. Method: Two-Stage Least Squares C 6.99E+10 8.25E+09 8.477.653 0.0001*** Included observations: 10 after adjustments YD 0.707140 0.009158 7.721.672 0.0000*** Constant added to instrument list CO(-1) -0.025115 0.012324 -2.037.798 0.0810* R-squared 0.999733 Mean dependent var 1.36E+12 Adjusted R-squared 0.999656 S.D. dependent var 2.96E+11 S.E. of Regression 5.50E+09 Sum squared resid 2.11E+20 F-statistic 13077.97 Durbin-Watson stat 2.246.224 Prob(F-Statistic) 0.000000 Second-Stage SSR 7.55E+20 J-Statistic 4.001.006 Instrument rank 6 Prob(J-Statistic) 0.261356 Dependent Variable: I Instrument specification: CO(-1) T G NX R(-1) Coefficient Std. Error t-Statistic Prob. Method: Two-Stage Least Squares C -3.96E+10 1.04E+11 -0.381143 0.7144 Included observations: 10 after adjustments Y 0.177090 0.023393 7.570088 0.0001*** Constant added to instrument list R(-1) 4.78E+09 1.60E+10 0.299283 0.7734 R-squared 0.899302 Mean dependent var 3.55E+11 Adjusted R-squared 0.870531 S.D. dependent var 8.79E+10 S.E. of Regression 3.16E+10 Sum squared resid 7.01E+21 F-statistic 31.26995 Durbin-Watson stat 0.878413 Prob(F-Statistic) 0.000324 Second-Stage SSR 6.98E+21 J-Statistic 6.958818 Instrument rank 6 Prob(J-Statistic) 0.073222
  9. 9. AzerbaijanRESULTS Izmir University of Economics ECON324 May 2011 Dependent Variable: CO Instrument specification: CO(-1) T G NX R(-1) Coefficient Std. Error t-Statistic Prob. Method: Two-Stage Least Squares C 3.17E+09 5.22E+08 6.066479 0.0005*** Included observations: 10 after adjustments YD 0.316725 0.036941 8.573728 0.0001*** Constant added to instrument list CO(-1) -0.273464 0.148945 -1.836003 0.1090 R-squared 0.970477 Mean dependent var 7.07E+09 Adjusted R-squared 0.962042 S.D. dependent var 3.95E+09 S.E. of Regression 7.69E+08 Sum squared resid 4.14E+18 F-statistic 115.3712 Durbin-Watson stat 2.333843 Prob(F-Statistic) 0.000004 Second-Stage SSR 3.76E+18 J-Statistic 3.858335 Instrument rank 6 Prob(J-Statistic) 0.277173 Dependent Variable: I Instrument specification: CO(-1) T G NX R(-1) Coefficient Std. Error t-Statistic Prob. Method: Two-Stage Least Squares C 1.32E+10 2.16E+09 6.127945 0.0005*** Included observations: 10 after adjustments Y 0.189926 0.012545 15.13929 0.0000*** Constant added to instrument list R(-1) -6.47E+08 1.21E+08 -5.358508 0.0011*** R-squared 0.970934 Mean dependent var 5.10E+09 Adjusted R-squared 0.962629 S.D. dependent var 3.06E+09 S.E. of Regression 5.91E+08 Sum squared resid 2.44E+18 F-statistic 116.9233 Durbin-Watson stat 1.384175 Prob(F-Statistic) 0.000004 Second-Stage SSR 2.44E+18 J-Statistic 6.628834 Instrument rank 6 Prob(J-Statistic) 0.084718
  10. 10. BrazilRESULTS Izmir University of Economics ECON324 May 2011 Dependent Variable: CO Instrument specification: CO(-1) T G NX R(-1) Coefficient Std. Error t-Statistic Prob. Method: Two-Stage Least Squares C 1.51E+10 6.86E+09 2.206767 0.0631* Included observations: 10 after adjustments YD 0.613149 0.021898 28.00040 0.0000*** Constant added to instrument list CO(-1) 0.111589 0.037621 2.966131 0.0209** R-squared 0.970477 Mean dependent var 7.07E+09 Adjusted R-squared 0.962042 S.D. dependent var 3.95E+09 S.E. of Regression 7.69E+08 Sum squared resid 4.14E+18 F-statistic 115.3712 Durbin-Watson stat 2.333843 Prob(F-Statistic) 0.000004 Second-Stage SSR 3.76E+18 J-Statistic 3.858335 Instrument rank 6 Prob(J-Statistic) 0.277173 Dependent Variable: I Instrument specification: CO(-1) T G NX R(-1) Coefficient Std. Error t-Statistic Prob. Method: Two-Stage Least Squares C -2.58E+10 6.97E+10 -0.370223 0.7222 Included observations: 10 after adjustments Y 0.197003 0.021664 9.093563 0.0000*** Constant added to instrument list R(-1) 1.16E+08 9.19E+08 0.126045 0.9032 R-squared 0.961156 Mean dependent var 1.68E+11 Adjusted R-squared 0.950058 S.D. dependent var 8.88E+10 S.E. of Regression 1.99E+10 Sum squared resid 2.76E+21 F-statistic 86.55435 Durbin-Watson stat 2.288542 Prob(F-Statistic) 0.000012 Second-Stage SSR 2.80E+21 J-Statistic 6.765710 Instrument rank 6 Prob(J-Statistic) 0.079752
  11. 11. ConclusionCONCLUSION Izmir University of Economics ECON324 May 2011 In all countries there is a positive and significant effect between disposable income and total personal consumption at %1 significance level. In terms of United Kingdom there is a negative and significant effect between lagged total personal consumption and total personal consumption at 10% significance level. Respect to Brazil there is positive and significant effect between lagged total personal consumption and total personal consumption at 5% significance level. According to Azerbaijan there is a negative effect between lagged total personal consumption and total personal consumption which is not significant. For all countries there is a positive and significant effect between GDP and domestic investment at %1 significance level. In terms of both United Kingdom and Brazil there is a positive effect between real interest rate and domestic investment which is not significant; on the other hand, with respect to Azerbaijan the negative and significant effect between real interest rate and domestic investment exists at %1 significance level. Despite of interpreting results, because of containing unit root the results are unreliable.
  12. 12. ThankYou Izmir University of Economics ECON324 May 2011

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