The relationship between gross domestic product (GDP), inflation, import and export from a statistical point of view

Oshungade, Stephen Ayodele (2015) The relationship between gross domestic product (GDP), inflation, import and export from a statistical point of view. Doctoral thesis (PhD), University of Sussex.

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The term relationship in a general statistical concept connotes a wide range of meanings and applications. However, the resultant meaning of the term usually focus on the principle of connectivity, association, causation, inter-relationship, or linkages between variables. In view of this, the thesis reports on the statistical relationships between GDP, Inflation, Export and import. The study utilized 65 countries with data ranging from 1970 to 2011.

The research, which is an applied empirical, involves two phases. The first phase dealt with the exploration of nature and pattern of Granger causality concept by using GDP and inflation. In this phase, we first ensured the stationarity and stability of our time series variables are maintained. The stationary and non-stationary instruments utilized include ADF, PP, KPSS, Chow and Quandt tests. After these, we carried out extensive computations using the Granger causality. It should be noted that the concept of Granger causality is concerned with how a variable X can enhance or better the prediction of other variable Y by using the principle of cause and effect.

In the second phase of the study, we explored the possible linkages of exports and imports to the Granger causality of GDP and Inflation that were established in Phase 1. To achieve this, we first carried out pairwise Granger causality tests on the four variables (GDP, Inflation, Export and Import) and then considered further computations and testing on the said variables by utilizing the principles of Bayes theorem, assignment problem models, coefficient of variation and other relevant statistical concepts. In fact, the results at this phase are the major contributions to knowledge.

The general description of the study embraced the conceptual steps, where we considered relevant literatures on Granger causality and theory of some statistical principles and practices as earlier mentioned above. Next, we have the empirical studies description in which the methodology, results/findings and interpretations on the study were considered.

Based on our findings, we conclude that Inflation “Granger causes” GDP most often occurred than the other combinations of Granger causality between Inflation and GDP. Also, it was established that countries with developed economies supported the Granger causality concept better than the developing economies. This result can be attributed to the stability of most of the developed economy variables, while it is unstable with most of the developing economy countries. With countries supporting Granger causality, we have uniformly distributed pattern for the three types in the developed economies whilst skewed toward Inflation “Granger causes” GDP for the developing economies.

For other important conclusions, we could establish that less volatility of export over import supports the bidirectional Granger causality whilst higher volatility of exports over import is relationally linked to the unidirectional Granger causality. We inferred also that when there is unidirectional Granger causality between inflation and import (or export), there is also unidirectional causality between GDP and inflation by the Bayes’ Rule; and when there is bidirectional Granger causality between GDP and import only, there is bidirectional causality between GDP and inflation.

Item Type: Thesis (Doctoral)
Schools and Departments: School of Mathematical and Physical Sciences > Mathematics
Subjects: H Social Sciences > HG Finance > HG0101 Theory. Method. Relation to other subjects > HG0106 Mathematical models
Q Science > QA Mathematics > QA0276 Mathematical statistics
Depositing User: Library Cataloguing
Date Deposited: 27 Feb 2015 16:58
Last Modified: 28 Sep 2015 13:02

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