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ECO 204 (Statistics for Business and Economics II)

Section: 07

Prepared For

Afia Fahmida Daizy

Lecturer
Department of Economics

Prepared by

Name ID
Hasib 2019-1-10-138

Fahim Ahmed Khan 2019-1-10-272

Bachelor of Business Administration

East West University
16 September 2021
 Table of contents

Introduction:..............................................................................2
Description:................................................................................3
Methodology.............................................................................4
Table 1......................................................................................5
Table 2......................................................................................6
Table 3......................................................................................7
Hypothesis Testing...................................................................8
Result analysis.........................................................................11
Conclusion...............................................................................12
Appendix..................................................................................13
Reference..................................................................................16
Introduction:
The financial account measures the increase and decrease of international ownership and assets that a country associated
with foreign country and the capital account measure the capital expenditure and overall income of a country. These terms
represent a country’s overall economic condition if it shows that the capital and financial account is increasing or surplus
that means the country earns more than expend and this is the goal what every country wants to achieve. The financial and
capital account consists with various types of variables such as foreign direct investment inflow & outflow, net capital
account, portfolio investment etc. The capital and financial account also known as balance of payment (BOP) basically it is
the record of any payment or receipt between one nation and its nationals with any other country.

We are working on capital and financial account in Bangladesh, we have to find out the impact of capital and financial
account on Bangladesh economic. Bangladesh has a tremendous BOP surplus on third quarter about $4 billion in fiscal
year 2020. But the previous year in 2019 Bangladesh was in deficit of $204 million. in 2020 we saw a huge amount of
surplus because of the pandemic situation. this time we don’t import enough from foreign because of covid- 19 but we are
continuing our exports also we see a huge flow of remittance in last quarter of the year for that we see the surplus. But it is
not the real scenario maximum time we see deficit our BOP. We have to give importance on this fix the problem now
because after the pandemic it will be a new starting point for every country. so, from now we have to find in which sector
we are lagging behind, by which we can overcome out situation. And we are working for this same purpose where we are
trying to find the impact of our independent variables (Reserves and related items (Bop, current US$),), Portfolio
investment, (Bop, current US$), Net Financial account (Bop, current US$)) on our dependable variable (Net Capital
account)

Our objective of the study is to understand the importance and impact of all those segments on capital and financial
account. To find out in which segment our country is performing bad. To show the statistics by using STATA
Description:

Source of data:

We are using secondary data to analyze the impact of those segments on capital and finance account in Bangladesh from
2016 to 2020. All data has been collected from the World development Indicators website.0

Description of data:

Variable Name Symbol Description Data Source

Net Capital account NCA (BOP, current US$) World Development Indicators

Portfolio investment PRI (BOP, current US$)

Reserves and related items RRI (BOP, current US$)

Net Financial account NFA (BOP, current US$)

Summary statistics

Variables Minimum Maximum Mean Std. Dev Variance Skewness Kurtosis

213000000 427,000,000 285,000,000 85,300,000 7280000000000000 1.038419 2.62752

NCA

14200000000000000000
NFA -7600000000 768000000 -3520000000 3770000000 .2027274 1.305724

RRI -1,060,000,000 9,280,000,000 2,920,000,000 4,230,000,000 17900000000000000000 .6717903 1.925122

PRI -42100000 386000000 138000000 176000000 31000000000000000 .2846741 1.79423

Here we can see that the minimum value of Net capital account is 213000000 which is good compared to the lowest Net
capital account holder country in the world which is Ireland with -60,573,910,000 Net capital in USD. Our maximum Net
capital value is 427,000,000 (427 million USD) which is much lower than the highest Net capital account holder country in
the world which is Poland with 14,478 million USD, and that’s the 47.43% of worlds net capital account.
Methodology

We assume that there has a vital relationship between our dependent and independent variable. We are not sure that if
they have any relation or not. So, for the justification we are going to use ordinary least square method (OLS) and
regression analysis by using STATA.

Mathematical specification:

NCA i=β 1+ + β 2 PRI i + β 3 RRii + β 4 NFA i

Here the NCA is our dependable variable and we can see that the formula includes β 1 which is the intercept coefficient,
and the β2, β3 , β4 is the parameter for slop of the coefficient .

Econometrics specification:

NCA i=β 1+ + β 2 PRI i + β 3 RRI i + β 4 NFA i +ui

Ordinary Least Squares (OLS) is a method for calculating linear least squares in a linear regression model using a known
or unknown parameter. The OLS technique uses the average of independent and dependent variables to link them. To
achieve the most accurate result from the linear line, the OLS method uses squares. The formula that is given below from
the OLS method is differentiated to find values for β1, β2, β3, β4 and to R2. Here we find R2 to get the goodness of fit.

∑ u^ i2=∑ (Y i− β^ 1− β^ 2 xi )2
 Table 1
Where independent variable is PRI (BOP, current US$)

Year PRI NCA xi Yi xi*yi xi2 yi2

= Xi = Yi =(Xi-Xbar) = (Yi-Y bar)
2016 -42067755.31 427376864.1 -142204026.5 142186027.9 -20,219,425, 20,221,985, 20,216,866,
684,423,800.00 166,348,900.00 526,450,400.00
2017 178794068.5 292955563.8 78657797.22 7764727.636 61075637, 6,187,049, 60290995263291
1846716 063,004,700.00
2018 -22454139.71 264165029.4 -122590410.9 -21025806.82 2,577,562, 15,028,408, 442084552426423
298,598,040.00 856,832,300.00
2019 386409182.8 227998418.6 286272911.5 -57192417.59 -16,372,639, 81,952,179, 3,270,972,630,
900,988,700.00 868,276,300.00 115,660.00
2020 189200954.1 213458305.1 89064682.9 -71732531.11 -6,388,835, 7,932,517, 5,145,556,019,
136,931,030.00 739,868,570.00 589,920.00
∑Xi = ∑Yi= ∑xi*yi= ∑xi2= ∑yi2=
500681356.2 1425954181 -39,792,582, 131,322,140, 29,135,770,
N=5 Y bar = 051,898,700.00 694,331,000.00 723,845,700.00
X bar = 285190836.2
100136271.2

NOW,

^β 2= ∑ xiyi =?
∑ xi2

^β 1=Y^ − ^β2∗X́=?
 Table 2

Where independent variable is RRI (BOP current US$)

Year RRI NCA xi Yi xi*yi xi2 yi2

= Xi = Yi =(Xi-Xbar) = (Yi-Y bar)
2016 5094740777 427376864.1 4034628354 142186027.9 573,667,779, 16,278,225,951, 20,216,866,
592,426,000.00 184,800,000.00 526,450,400.00
2017 628278669.5 292955563.8 -431833754.2 7764727.636 -3,353,071, 186,480,391, 60290995263291
485,832,930.00 308,973,000.00
2018 -1057683832 264165029.4 -2117796256 -21025806.82 44,528,374, 4,485,060,982, 442084552426423
964,997,400.00 431,430,000.00
2019 635226504.3 227998418.6 -424885919.4 -57192417.59 24,300,252, 180,528,044, 3,270,972,630,
932,974,100.00 524,064,000.00 115,660.00
2020 9281844918 213458305.1 8221732494 -71732531.11 -589,765,681, 67,596,885, 5,145,556,019,
917,352,000.00 204,091,100,000.00 589,920.00
∑Xi = ∑Yi= ∑xi*yi= ∑xi2= ∑yi2=
5300562119 1425954181 49,377,654, 88,727,180,573, 29,135,770,
N=5 Y bar = 087,212,300.00 540,400,000.00 723,845,700.00
X bar = 285190836.2
1060112424

NOW,

^β 3= ∑ xiyi =?
∑ xi2
 Table 3
Where the independent variable is NFA (BOP, Current US$)

Year NFA NCA xi Yi xi*yi xi2 yi2

= Xi = Yi =(Xi-Xbar) = (Yi-Y bar)
2016 135567590.7 427376864.1 3809249521 142186027.9 541,622,058, 14,510,381,911, 20,216,866,
594,161,000.00 656,400,000.00 526,450,400.00
2017 -6186311402 292955563.8 -2512629472 7764727.636 -19,509,883, 6,313,306,862, 60290995263291
499,230,900.00 680,330,000.00
2018 -7603218242 264165029.4 -3929536312 -21025806.82 82,621,671, 15,441,255,627, 442084552426423
389,537,100.00 987,100,000.00
2019 -4714447597 227998418.6 -1040765667 -57192417.59 59,523,904, 1,083,193,173, 3,270,972,630,
644,262,400.00 638,370,000.00 115,660.00
2020 768311645.7 213458305.1 4441993576 -71732531.11 -318,635,442, 19,731,306,927, 5,145,556,019,
371,111,000.00 472,700,000.00 589,920.00
∑Xi = ∑Yi= ∑xi*yi= ∑xi2= ∑yi2=
-18368409651 1425954181 345,622,308, 57,079,444,503, 29,135,770,
N=5 Y bar = 757,619,000.00 434,900,000.00 723,845,700.00
X bar = 285190836.2
-3673681930

NOW,

^β 4 = ∑ xiyi =?
∑ xi2
Hypothesis Testing
All the values of the table are collected from STATA, also the result is given based on STATA.

Hypothesis Alternative Hypothesis P - Value Analysis Result

H 01: β 2> 0   H a 1 : β 2< 0 0.493 P value < 0.1 Don’t reject the Null

H 02: β 3 >0   H a 2 : β 3 <0 0.672 Don’t reject the Null

  H 03: β 4 >0 H a 3 : β 4 <0 0.419 Don’t reject the Null

Now, we are going to check the result by our own.

Hypothesis testing for β2,

So,

a = .05 (as the confidence interval is 95%)

N=5

DF=N-1=5-1=4

Standard error = .2153693

^
β 2= -0.3030150273
^β 2−β 2 −0.3030150273−0
t= = =−1.406955529
se ( ^β 2) .2153693

Critical value from T table,

ta, df = .05,4 = 2.132 = -2.132

 For β3,

Standard error = .0317927

^
β 3= -0.0005565110237
^β 3−β 3 0.0005565110237−0
t= = =0.01750436495
se ( ^β 3) .0317927

Critical value from T table,

ta, df = .05,4 = 2.132 = -2.132

For β4,

Standard error = .0321175

^
β 4 = 0.006055109887
^β 4− β 4 0.006055109887−0
t= = =0.1885299256
se( ^β 4 ) .0321175
Critical value from T table,

ta, df = .05,4 = 2.132 = -2.132

Result analysis
After hypothesis testing, we get don’t reject the null for ^
β2 , ^
β 3 , β^4 that means they are not affecting our
dependable variable Net capital account (NCA).

Now,

^
β 1=Ý −( ^
β 2∗ X́ )=¿ 285190836.2 – (-0.3030150273*100136271.2) = 315533631.2

NII i= ^
^ β 1+ ^
β2 PRI i + ^
β 3 RRI i + ^β 4 NFA i+ u^i

^
NII i=315533631.2+−0.3030150273 PRI i+−0.0005565110237 RRI i +0.006055109887 NFA i+ u^i

Interpretations

β 1 = If PRI, RRI, NFA is 0 NCA will be 315533631.2 on an average if all other things remain constant.

β 2= If PRI increased by 1-unit NCA will decrease by -0.3030150273 unit on an average if all other things remain

constant.

β 3 = If RRI increased by 1-unit NCA will decreased by -0.0005565110237 unit on an average if all other things

remain constant.
β 4 = If NFA increased by 1-unit NCA will increased by 0.006055109887 unit on an average if all other things remain

constant.

Conclusion
We expected that our all variable is related to our dependable variable but when we analyze all data by using

STAT and pen and paper, we see that our independent variables are not related with our dependable variable

because we get Don’t reject the null that means all our efforts and work are in vain.
Appendix
Variable Obs Mean Std. Dev. Min Max

Portfolioe~s 5 -1.69e+07 2.29e+08 -3.55e+08 2.58e+08

Netcapital~e 5 2.85e+08 8.53e+07 2.13e+08 4.27e+08
Netfinanci~r 5 -3.52e+09 3.77e+09 -7.60e+09 7.68e+08
Reservesan~P 5 2.92e+09 4.23e+09 -1.06e+09 9.28e+09

Portfolio equity, net inflows (BoP, current US$)

Percentiles Smallest
1% -3.55e+08 -3.55e+08
5% -3.55e+08 -6.97e+07
10% -3.55e+08 -3.27e+07 Obs 5
25% -6.97e+07 1.14e+08 Sum of Wgt. 5

50% -3.27e+07 Mean -1.69e+07

Largest Std. Dev. 2.29e+08
75% 1.14e+08 -6.97e+07
90% 2.58e+08 -3.27e+07 Variance 5.25e+16
95% 2.58e+08 1.14e+08 Skewness -.3624322
99% 2.58e+08 2.58e+08 Kurtosis 2.158698
 Net capital account (BoP, current US$)

Percentiles Smallest
1% 2.13e+08 2.13e+08
5% 2.13e+08 2.28e+08
10% 2.13e+08 2.64e+08 Obs 5
25% 2.28e+08 2.93e+08 Sum of Wgt. 5

50% 2.64e+08 Mean 2.85e+08

Largest Std. Dev. 8.53e+07
75% 2.93e+08 2.28e+08
90% 4.27e+08 2.64e+08 Variance 7.28e+15
95% 4.27e+08 2.93e+08 Skewness 1.038419
99% 4.27e+08 4.27e+08 Kurtosis 2.62752

Net financial account (BoP, current US$)

Percentiles Smallest
1% -7.60e+09 -7.60e+09
5% -7.60e+09 -6.19e+09
10% -7.60e+09 -4.71e+09 Obs 5
25% -6.19e+09 1.36e+08 Sum of Wgt. 5

50% -4.71e+09 Mean -3.52e+09

Largest Std. Dev. 3.77e+09
75% 1.36e+08 -6.19e+09
90% 7.68e+08 -4.71e+09 Variance 1.42e+19
95% 7.68e+08 1.36e+08 Skewness .2027274
99% 7.68e+08 7.68e+08 Kurtosis 1.305724
 Reserves and related items (BoP, current US$)

Percentiles Smallest
1% -1.06e+09 -1.06e+09
5% -1.06e+09 6.28e+08
10% -1.06e+09 6.35e+08 Obs 5
25% 6.28e+08 5.09e+09 Sum of Wgt. 5

50% 6.35e+08 Mean 2.92e+09

Largest Std. Dev. 4.23e+09
75% 5.09e+09 6.28e+08
90% 9.28e+09 6.35e+08 Variance 1.79e+19
95% 9.28e+09 5.09e+09 Skewness .6717903
99% 9.28e+09 9.28e+09 Kurtosis 1.925122

NetcapitalaccountBoPcurre Coef. Std. Err. t P>|t| [95% Conf. Interval]

Portfolioequitynetinflows .2784763 .2153693 1.29 0.419 -2.45805 3.015002

NetfinancialaccountBoPcur .0328369 .0321175 1.02 0.493 -.3752546 .4409285
ReservesandrelateditemsBoP -.0180152 .0317927 -0.57 0.672 -.42198 .3859495
_cons 4.58e+08 2.04e+08 2.25 0.266 -2.13e+09 3.05e+09
Reference
https://databank.worldbank.org/source/world-development-indicators