2.

2 Testing Procedures

2.2.1 ARDL bounds test for co integration

According to the Belloumi, M. (2013) this test is used to investigate the long-run relationship and
short-run dynamic co-integrating among the variables. It encompasses of three benefit if compare with
other traditional co integration measurements. Firstly, ARDL is not necessary that all the variables under
the research to be inter-connected at the same order. It can also applicable if those variables are cointegrating in different order such as in order one or order zero. Secondly, ARDL is relatively more
efficient and suitable with small and finite sample size. Lastly, an unbiased investigation of the long-run
model can be obtained by applying the ARDL techniques. Other works using ARDl such as (Yue,Y. and
Serge, N.B.Z., 2010; Aseidu, M.K., 2013; Sakyi, D., Commodore, R., Opoku, E.E.O., 2015).
2.2.3 Granger-short run and long-run causality tests
Granger causality within VECM is applied to identify the flow of direction of causality between the
variables. The existence of at least one direction which is denoted by the F-statistics and the lagged errorcorrection term is the criteria of long run relationship between variables. The short run causal effect is
denoted by the F-statistics on the independent variable meanwhile the t-statistics on the coefficient of the
lagged error-correction term depicts the long-run relationship. Other works using Granger causality are
(Yue, Y. and Serge, N.B.Z., 2010; Kakar, Z.K. and Khilji, B.A., 2011).