How Gdp Affect Mauritius- an Econometric Expla
Topics: Economics, Regression analysis, Inflation, Stock market, Econometrics, Stock / Pages: 7 (1716 words) / Published: Mar 14th, 2013

Regression Analysis Variables | Coefficient | Standard Errors | T-Ratio | P-value | In Real interest rate | -0.2600846 | 0.1930792 | -1.35 | 0.196 | In Inflation rate | 0.0972735 | 0.1828835 | 0.53 | 0.602 | In Money supply | 0.9009881 | 0.897232 | 10.04 | 0.000 | No constant | -0.0138525 | 2.724178 | -0.01 | 0.996 |
Dependent variable: Semdex

Prob > F = 0.0000
R- Squared = 0.8841
Adj R-squared = 0.8636

.

The Adjusted R2 - the coefficient of determinationR2 is used in the context of statistical models whose main purpose is the prediction of future outcomes on the basis of other related information. The R-squared is 0.8841, when adjusted being about 0.8636 meaning that approximately 86% of the variability of LSEDX is accounted for the variables in the model as the adjusted R-squared attempts to yield a more honest value. As R-squared gets closer to 100%, it means that the model is 100% right. This shows that this model is reliable at 88% and it explains any variation in the dependent variables.

The economy has progressed significantly over the past decades. Indeed, Mauritius has gone up the scale from a least developed country to a developing country status. This has been possible due to a certain extent because of the control of money supply, inflation and real interest rate on savings.

Testing for Multicollinearity

| Lnsemdex | Lnreal Interest Rate | Lninflation | Lnmoney Supply | Lnsemdex | 1.0000 | | | | Lnreal interest rate | -0.1669 | 1.0000 | | | Lninflation | -0.3325 | -0.3303 | 1.0000 | | Lnmoney supply | 0.9289 | -0.0303 | -0.4483 | 1.0000 |
Before checking for multicollinearity is important as it helps to know whether there is a strong correlation amongst the explanatory variables in a regression model. The results above show that there is highest correlation between Lnsemdex and Lnmoney supply at 93%. Correlations around 0.8 and 0.9 are not desirable as they will indicate



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