Page 206 - Contributed Paper Session (CPS) - Volume 8

CPS2252 Zakaya R.
And then, they are integrated at order one I(1). And then, the variables are
eligible to test the long run cointegration analysis between them.

a. Trace, max-eigen and Pedroni tests of cointegration
 Trace and max-eigen tests
According to Trace test, one (1) cointegrating equation at the level
of 5% were accepted. The P-values from trace test and max-eigen
statistic are significant at 5% level. This shows existence of a long-run
relationship between X, HDI and IQ.
Table 4: Trace Test for cointegration
Trace test P value Max-eigen test P value
None 55.14 0.0000 62.48 0.0000
At most 1 9.906 0.7690 10.76 0.7049
At most 2 10.67 0.7120 10.67 0.7120

 Predroni test
Pedroni (2004) is used to test cointegration. And then, as results
shows, four (4) of seven (7) statistics gives by Pedroni test concluded
on existence of cointegration relation between exports, human
resources development and institutional quality. And then, according
to Granger representation theorem, an vector error correction model
(ECM) can be perform.
Table 5: Pedroni test for cointegration
Alternative hypothesis: common AR coefs. (within-dimension)
Weighted
Statistic P value P value
Statistic
Panel v-Statistic -1.079967 0.8599 -1.079967 0.8599
Panel rho-Statistic -1.350867 0.0884 -1.350867 0.0884
Panel PP-Statistic -2.428329 0.0076 -2.428329 0.0076
Panel ADF-Statistic -1.908328 0.0282 -1.908328 0.0282

Alternative hypothesis: individual AR coefs. (between-dimension)
Statistic P value
Group rho-Statistic -0.242182 0.4043
Group PP-Statistic -2.679863 0.0037
Group ADF-Statistic -1.873918 0.0305

3. Result
Cointegration equation
Cointegration equation is given by: = −, + ,
On the long term, HDI have negative impact to X, exports and IQ have
positive impact on X.

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