Page 151 - Contributed Paper Session (CPS) - Volume 4

CPS2160 Aye Aye Khin et al.
3.3 Granger Causality
Table 1: Results of Granger Causality Analysis for China

Null Hypothesis F-statistics (p-value) Decision
nrstr20 granger cause nrimp 2.4675** (0.0475) Supported
nrimp granger cause nrstr20 3.5149*** (0.0091) Supported
exrm granger cause nrimp 2.2425* (0.0674) Supported
nrimp granger cause exrm 3.6254*** (0.0076) Supported

Table 2: Results of Granger Causality Analysis for India

Null Hypothesis F-statistics (p-value) Decision
exrm granger cause nrimp 2.7960** (0.0424) Supported

Table 3: Results of Granger Causality Analysis for USA

Null Hypothesis F-statistics (p-value) Decision
nrimp granger cause nrstr20 2.1106* (0.0825) Supported
nrimp granger cause nrsmr20 2.2915* (0.0625) Supported

Table 4: Results of Granger Causality Analysis for Japan

Null Hypothesis F-statistics (p-value) Decision
nrimp granger cause nrstr20 2.7396* (0.0679) Supported
exrm granger cause nrimp 2.7261* (0.0687) Supported
nrimp granger cause nrsmr20 4.0854** (0.0188) Supported
Source: Own Data Calculation
Note: *, ** and *** denotes significance at 1%, 5% and 10% significant level
respectively.

4. Discussion and Conclusion
As seen the equations above, Equation (5), (6), (7) & (8) shows China, India,
USA and Japan NR import demand (nrimpt) cointegration equation. The
variables of NR import (nrimpt-2), SICOM price (nrstr20t-2) and SMR20 price
(nrsmr20t-2), are cointegrated and has a long-term relationship with
statistically significance at α 0.01, 0.05 and 0.10 level respectively. However,
the exchange rate (exrmt-2) is not significant in China and USA at α 0.05 level.
Looking at Equation (9), it shows China’s natural rubber import demand
VECM model results, the explanatory variables accounted for about 87.25
percent of the variation in the China natural rubber import demand equation.
Estimations reveal that the explanatory variables, namely the world NR price
(nrstr20t-1), China’s exchange rate (exrmt-1), NR SMR20 price (nrsmr20t-1) and
the lag variable of China’s natural rubber import demand (nrimpt-1), were the
most important explanatory variable with statistically significance at the 0.01
level.

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