Student’s name: Muyhong Khov

Instructor: Angkeara Bong

Course: BUS 112 Section 2

EViews: How to develop and test Growth Model in EViews

Economic growth model

Conceptual model

Economic growth variable

Independent variable Dependent variable

Statistical model

Independent variable: GNI

Independent variable:
Industry Dependent variable: GDP

Independent variable:
Inflation
Independent variable:
School enrollment

Independent variable:
Unemployment
 Economic Growth Model for Thailand
 Step 1: Basic Formula
 Y(output) = f (var1, var2, var3, var4, var5) (1)
 GDP = f (GNI, Industry, Inflation, School enrollment, Unemployment) (2)
 Log (GDP) = f (GNI, Industry, Inflation, School enrollment, Unemployment) (3)
 Log (GDP) = Log (GNI) + Log (Industry) + Log (Inflation) + Log (School enrollment)
+ Log (Unemployment) (4)
 Time series data: 1996-2015.
 5 independent variables: GNI, Industry, Inflation, School enrollment, Unemployment.
 Research Questions:
 What are the impacts of economic growth in Thailand from 1996 to 2015?
 What are the impacts of GNI on economic growth in Thailand from 1996 to 2015?
 What are the impacts of Industry on economic growth in Thailand from 1996 to 2015?
 What are the impacts of Inflation on economic growth in Thailand from 1996 to 2015?
 What are the impacts of School enrollment on economic growth in Thailand from 1996 to
2015?
 What are the impacts of Unemployment on economic growth in Thailand from 1996 to
2015?
 Step 2: Run the Regression of EViews
(A). Run the regression for each variable. Then screenshot your result for each variable (one
by one).
1. GNI

2. Industry
3. Inflation
4. School enrollment

5. Unemployment
(B). Run the regression for all 5 variables (Main Model). Then screenshot your result for all 5
variables (Main Model).

(C). Interpret the results of each variable in the main model B

 Interpretation of GNI: The result of probability is 0.0040 less than 0.05 or 5%, meaning
that your variable is significant or there is a positive relationship between variable GNI and
variable GDP. Therefore, GNI would have boosted our economic growth rate in Thailand
from 1996 to 2015.
 Interpretation of Industry: The result of probability is 0.0013 less than 0.05 or 5%,
meaning that your variable is significant or there is a positive relationship between variable
Industry and variable GDP. Therefore, Industry would have boosted our economic growth
in Thailand from 1996 to 2015.
 Interpretation of Inflation: The result of probability is 0.5146 more than 0.05 or 5%,
meaning that your variable is not significant or there is a negative relationship between
variable Inflation and variable GDP. Therefore, Inflation will not contribute to economic
growth rate in Thailand from 1996 to 2015.
 Interpretation of School enrollment: The result of probability is 0.3876 more than 0.05
or 5%, meaning that your variable is not significant or there is a negative relationship
between variable School enrollment and variable GDP. Therefore, School enrollment will
not contribute to economic growth rate in Thailand from 1996 to 2015.
 Interpretation of Unemployment: The result of probability is 0.5284 more than 0.05 or
5%, meaning that your variable is not significant or there is a negative relationship between
variable Unemployment and variable GDP. Therefore, Unemployment will not contribute
to economic growth rate in Thailand from 1996 to 2015.
 Step 3: Test your main model whether it is valid or not (workable?)
 Option 5
1. Histogram

 Based on the results of probability is more than 0.05 or 5%, we can assume that our
model is not valid and not workable.
2. Heteteroskedasticity Test
  Based on the results of probability F is more than 0.05 or 5%, we can assume that our
model is not valid and not workable.
3. Correlogram Q Test

 Based on the results of probability is more than 0.05 or 5%, we can assume that our
model is not valid and not workable.
 Step 4: Write a short summary of your research
a. Introduction
Over the last four decades, Thailand has made remarkable progress in social and
economic development, moving from a low-income to an upper-income country in less than a
generation. As such, Thailand’s has been a widely cited development success story, with
sustained strong growth and impressive unemployment reduction.
Thailand’s economy grew at an average annual rate of 7.5% in the boom years of 1960-
1996 and 5% during 1999-2005 following the Asian Financial Crisis. This growth created
millions of jobs that helped pull millions of people out of poverty. Gains along multiple
dimensions of welfare have been impressive: more children are now getting more years of
education, and virtually everyone is now covered by health insurance while other forms of social
security have expanded. Its success may result in enhancing GNI, Industry, School enrollment,
Inflation, and reducing the unemployment rate. The industry is one of the successful independent
variables, which contributed to economic growth because since the mid-1990’s Thailand has
belonged to among the top-10 car manufacturers in the world. In the lightweight commercial
vehicle sector, Thailand is the 2nd largest in the world (after the USA).  The automotive sector
contributes nearly 12% of Thailand’s economic growth, employs around 500,000 people. In
2019 Thailand produced more than 2 million units annually with over 80% of all parts made
locally. All leading car brands from Japan, USA, Europe and India, including Toyota, Isuzu,
Honda, Mercedes, Mitsubishi, Nissan, BMW, Ford have their major manufacturing facilities in
Thailand.
Independent variables and Dependent variable remain a central aspect of integration
schemes raising the question whether it affects growth for the countries or not. Therefore, this
article aims to examine whether Independent variable promotes growth by observing the level of
initial GNI, Industry, School enrollment, inflation and reducing unemployment.
This article consists of four sections. The second section reviews the empirical literatures.
The third section presents a proposed model, data analysis and empirical results. The fourth and
final section offers a conclusion and recommendation.
b. Review of literature
In this section, we observe the literatures relevant to independent variables and dependent
variable. The independent variable is the variable the experimenter changes or controls and is
assumed to have a direct effect on the dependent variable. In an experiment, the researcher is
looking for the possible effect on the dependent variable that might be caused by changing the
independent variable. Previous studies found that inflation wouldn’t contribute to economic
growth. Bittencourt (2010) reviewed inflation and economic growth and examined poor
macroeconomic performance at high inflation rates in four countries in Latin America
(Argentina, Bolivia, Brazil, Peru) from 1970 to 2007 using panel data. The results showed that
higher rates of inflation have negatively affected economic growth in all four countries. High
rates of inflation led to many expensive economic activities, especially in traditional and
developing economies.
Feifei Wu, Qian Zhou, and Lucheng Huang (2011) examined the formation and
development of new industries has its own internal logic and rules, this logic and laws is the
mechanism of formation and development of emerging industry, it is concentrated expression of
the formation and development of new industries in the motivation, path, and influence factors.
Emerging industry represents the new requirements of the market economic system overall
output and the new direction of industrial structure conversion, but also represents a new level of
science and technology industry, industry itself is in the formative stages of the life cycle, is new
force to promote the evolution of industrial structure. The interaction evolution between new
industries and patent to knowledge economy and emerging industries in China maintain
sustained high-speed development is very important. Collaboration between development of new
industries patent and economic growth in the efficiency improvement is the future of our country
to enhance the level of new industries development, and the key to boost economic toward
intensive, knowledge-intensive development.
Agiomirgianakis and friends (2002) examine the contribution of schooling rates to
economic growth for a sample of 93 countries by employing a dynamic panel analysis. Results
suggested a positive and significant correlation between education and economic growth. But,
most important conclusion is the higher the level of education, the higher is the contribution from
education on economic growth.
The educational achievement of a society, usually referred to as the “human capital”
plays as an important role in economic growth. Dias and Tebaldi figure out that human capital
growth has a positive impact on the growth rate. On the other hand, Benhabib and Spiegel (1994)
find no evidence on positive and robust influence of human capital on economic growth.
c. Research objective
There are two main objectives of this article. First, this article examines the effect of
independent variable on dependent variable by observing the level of GNI, Industry, School
enrollment, Inflation, and reducing the unemployment rate. Second, this article further
investigates whether the model is valid or workable and whether it affect the economic growth.
 Research Questions:
 What are the impacts of economic growth in Thailand from 1996 to 2015?
 What are the impacts of GNI on economic growth in Thailand from 1996 to 2015?
 What are the impacts of Industry on economic growth in Thailand from 1996 to 2015?
 What are the impacts of Inflation on economic growth in Thailand from 1996 to 2015?
 What are the impacts of School enrollment on economic growth in Thailand from 1996 to
2015?
 What are the impacts of Unemployment on economic growth in Thailand from 1996 to
2015?
 Rationale of the studies
Based on the literature reviews, the empirical studies found the results of the relationship
between independent variable and growth are mixed. On the one hand, Bittencourt (2010) found
that higher rates of inflation have negatively affected economic growth in all four countries
(Argentina, Bolivia, Brazil, Peru). Moreover, Benhabib and Spiegel (1994) find no evidence on
positive and robust influence of human capital on economic growth. On the other hand, Dias and
Tebaldi figure out that human capital growth has a positive impact on the growth rate. Therefore,
examine the effect of independent variable on growth is critical for the policymakers to
formulate future policies to achieve higher growth.
d. Methodology
The growth theory suggests the importance of growth in terms of many factors include
GNI, Industry, School enrollment, Inflation, and reducing the unemployment rate. In this part,
we’re going to explains how to develop basic formula for your model and allowing readers to
evaluate the reliable and validity of the research. It expressed as follow:
Y(output) = f (var1, var2, var3, var4, var5) (1)
In equation (1), Y denotes output, f is factors, var1 is variable 1, var2 is variable 2, var3 is
variable 3…. etc. From equation (1), we can be written as follow:
GDP = f (GNI, Industry, Inflation, School enrollment, Unemployment) (2)
In equation (2), output now represent by GDP which is a dependent variable, f is factor,
and variable 1,2,3,4,5 now represent by GNI, Industry, Inflation, School enrollment, and
unemployment. From equation (2), the logarithm can be written as follows:
Log (GDP) = f (GNI, Industry, Inflation, School enrollment, Unemployment) (3)
In equation (3), we take GDP as dependent variable and GNI, Industry, Inflation, School
enrollment, and unemployment as independent variable, which consider the factors and effects of
the growth process. Due to the data that we collect is not stable, therefore we consider to use Log
in GDP to make it become stable. From equation (3), now the logarithm can be written as
follows:
Log (GDP) = Log (GNI) + Log (Industry) + Log (Inflation) + Log (School enrollment)
+ Log (Unemployment) (4)
In equation (4), we put logarithm is both side of variable to make the data among them
become stable.
e. Data source
The panel data were collected over 20 years (1996–2015) in Thailand. GDP, GNI,
Industry, Inflation, School enrollment, and Unemployment data were collected from The World
Bank.
 f. Analysis
We run the regression in EViews to check whether the variable was significant or not.
Based on the result in the first picture, we can see that only two among five variables are given
the positive relationship or significant result, therefore we can assume that our model is not valid
and not workable.
Picture 2 shows that, after we using Log in all variable to make it data become stable, the
result of four among five variables are showing the probability less than 5% or 0.05, meaning
that the variable is significant or there is a positive relationship between them. Moreover, the
result of R-squared is more than 70% or 0.70, and the result of Probability(F-statistic) also less
than 5% or 0.05, therefore now we can assume that our model is valid and workable.
Picture 1 Picture 2

g. Robust Testing
Picture 1 Picture 2
 Picture 3
The results after run the Residual Diagnostics now are completely changed, after we use
Log in term of all variable (GDP, GNI, Industry, Inflation, School enrollment, Unemployment)
to make the data become stable. In picture 1 which is show the result of Histogram ‐ Normality
test. Based on the results of probability is less than 5% or 0.05, we can assume that our model is
valid and workable.
Picture 2 shows the results of Heteteroskedasticity test, as we can see the results of
probability F(5,5) is less than 5% or 0.05, therefore we can assume that our model is valid and
workable.
Picture 3 shows the results of Correlogram Q test, the probability of 7 among 10 which
is more than a half are less than 5% or 0.05, therefore we can assume that our model is valid and
workable as well.
h. Conclusion/Recommendation
This article examined whether independent variables (GNI, Industry, Inflation, School
enrollment, Unemployment) contribute to economic growth in Thailand. The panel data were
collected over 20 years (1996–2015) in Thailand. In the first times of our experiment show that
the results are not significant or there is the negative relationship between them, meaning that our
model is not valid or not workable. However, after we found the solution by using Log in term of
all variable, the results after run the Regression and Residual Diagnostics now are significant.
Thus, we can assume that our model is valid and workable. In addition, based on the results that
we get above, we suggested that after you found your model is not valid or not workable, you
can check your data again by observe the source and the type of data to make sure it accurate and
reliable. After that, if your model still not work you can try to use Log in term of your variable
because it can make your data become stable. Lastly, if you follow or practice the tips above and
your model still not valid or workable you must consider to change your variable to make your
model work.