A Causality Analysis Between Population and Gross

Domestic Product (GDP) in the Philippines

Mylen L. Aala-Capuno, Edgar M. Adina, Patricia Thea Robles, Hardy D. Sierra*

Department of Mathematics, Mapua University, Intramuros, Manila, Philippines

*presentor, email: hdsierra@mapua.edu.ph

Copyright©2018 by authors, all rights reserved. Authors agree that this article remains permanently open access under the
terms of the Creative Commons Attribution License 4.0 International License

Abstract This study examined the effect of population to
the economic growth of the Philippines. Specifically, it
sought to explain the unidirectional relationship between
the Gross Domestic Product (GDP) and the population by
looking into the factors that trigger the association between
the two variables. Data on GDP, population, total imports
and exports covering the period 1967 to 2017 were used to
help attain the objectives of the study using time series
approaches like the Augmented-Dickey Fuller (ADF) Test,
the Johansen Cointegration Test, Granger Causality Test
along with Regression Analysis. The results revealed that
the series can be both stationary at first difference for
constant with trend and intercept model, hence, the two
variables are cointegrated. The existence of a unidirectional
association between the population and economic growth
was then examined. Finally, only imports as an economic
factor, induce the population to grow.
Keywords Gross Domestic Product, Population Growth,
Augmented-Dickey Fuller, Johansen Cointegration Test,
Granger Causality
equipment. It is also known to be a center of business
through outsourcing investment which for this reason, the
HSBC Holdings PLC, a British multinational banking,
believes that in 2050 the Philippine Economy may turn into
the second country in the economy rank by GDP, an
economic measurement also called as Gross Domestic
Product, after China. While based on Philippine National
Statistics, the GDP growth rate is expanding by an average
of 1.24% in years 1998-2017 with an expected highest
increase of 3.40% in the first quarter of 2010, and it is
estimated to rise 7-8% in 2018. However, the progressive
improvement of the Philippine economy depends on the
population and on the administration of the government by
dealing with the reduction of poverty, inequality between
the regions and corruption among different institutions. And
this study will tackle the effects that the population growth
might cause to the economic progress of the country.
Specifically, the correlation between the two.

The economist Thomas Robert Malthus was the first to deal

1. Introduction
The Philippines is an Asian country with a land wide of
298,170 km square, occupied by 106,512,074 people. It is a
country that is gradually developing from having an
economy based on agriculture to one that depends on
services and manufacturing. It provides some companies
overseas like Japan, Singapore, China, Germany, Taiwan,
and Thailand with petroleum products, semiconductors, and
electronic products, coconut oil, fruits, and transport
with this problem when in 1798, he declared that the rate of
population growth can surpass the availability of food
supply as natural resources are limited. The most recent
study and pertinent to the Philippine economy and its
population growth is a study conducted by Briones (2006),
who supported the idea of Mapa and Balisacan (2004) in
this study that examined the relation of population
dynamics to income growth among the 74 provinces of the
Philippines from the year 1985-2003. Using various
empirical tools, such as BACE, Briones demonstrated that
young dependents could help increase the income growth of
the provinces leading to a population policy needed to
improve the economic status of the country. (Mapa,
Balisacan & Briones, 2006, p.1). Another study conducted
by Fumitaka Fukuoka has shown using Johansen co-
integration test that there was a correlation between the
population and the economic progress of the Philippines
which measures the country’s economic performance.
While the Granger-causality test based on VECM indicated
that the latter induced the former to grow.
Today, many countries and economies believe that a
strong population growth can hinder the progress of the
country. But based on the results of the study conducted by
Fumitaka in 2010 between GDP and the population
expansion in the Philippines a unidirectional causality
exists. Which means that the GDP cause an increase in the
population but not vice versa. Also, his study does not
explain and indicate the factors that regulate such influence
so there is a necessity to clarify this matter. Accordingly,
this study will double-check the findings of Fukuoka. And,
if the outcome will be the same the researcher will verify if
imports and exports are the economic factors that caused
the unidirectional causality between the two variables.
Gross Domestic Product, also known as GDP, is a
monetary measure that expresses all the final goods and
services produced during a certain period. We have nominal
GDP, one of the various methods used to quantify the
efficiency of a country's economic performance and the real
GDP. Which unlike the former, it considers the changes due
to inflation. Among the two, the real GDP is the one that
will be used by the researcher to evaluate the economic
growth. Rather, based on the nominal GDP all the countries
are yearly rank accordingly to their development. And
since, a good economic performance, which could bring a
high
income per capita (the amount of money that a person
can earn in a certain area) and an increase in job positions,
which in turn can lead people to have more confidence in
their capacity to raise more than one or two children, we
can conclude that the economic growth can strengthen the
population growth. Accordingly, the objectives of this study
are first to determine if between population and the GDP
persists a unidirectional relationship. Then, to verify if total
imports and total exports can be those components of
economic growth that can explain the causality proven by
Fukuoka.
This aimed to settle the uncertainties and confirm the
results of the research study conducted by Fukuoka. It
sought to determine if any changes in the causality between
the economic growth and population occurred and indicate
the possible elements which play important roles in it. The
results are foreseen to help the Philippines, especially the
government and the economists, by having and showing
them a definite idea of what function has the population
expansion to the economy, such as given the current
situation, it might be better to reduce and decline the birth
rates and how to assist in improving the ongoing and future
situation of the country.
2. Materials and Methods
The study analyzed the relationship that exists between
the population and the economic growth and the factors that
might have caused the obtained causality. Therefore, the
gathered data are the Gross Domestic Product, total imports
and exports and population, all of which were obtained
from the Philippine Statistics Authority.
The researcher applied a quantitative correlational
research using a series of numerical data. Following, in part,
the process employed by Fukuoka (2010). Because of the
nature of data available, some steps were deliberately
altered such as the use of the classic Granger Causality
instead of Granger Causality based on VECM. Furthermore,
the researcher utilized the following approaches:
Augmented Dickey-Fuller Test, VAR Lag Selection,
Johansen co-integration, the Granger causality, and
Regression Correlation Analysis.
Preliminary transformation was done to eliminate the
effect of the inflation in the Gross Domestic Product and in
the considered economic factors (exports and imports).
Thus, the real values of abovementioned variables have
been obtained. After that, the conversion of the data into
logarithmic form was essential to eliminate the trend of the constant intercept model.
data. t-Statistics Prob.
In level unit ADF t- -0.204293 0.9309
root test Statistics
3. Findings -3.568308*
-2.921175**
Table 1 exhibits the outcomes of Population Growth’s
-2.598551***
ADF at a constant intercept model in level and first
t-Statistics Prob.
difference unit root test. This shows that in both in level and
In first ADF t- -6.337311 0.0000
in first difference, the time series data is stationary at 1%,
difference Statistics
5% and 10% significance level hence its mean and variance
unit root -3.571310*
are independent with time.
test -2.922449**
Table 1
-2.599224***
Augmented Dickey-Fuller Test (ADF) of the
*at 1%, ** at 5% and *** at 10% critical values
Population Growth and Economic Growth of the
Philippines. Table 3 reports the final output of the Augmented
*at 1%, ** at 5% and *** at 10% critical values t-Statistics Prob.
In level unit ADF t- -4.753345 0.0003
Meanwhile, Table 2 illustrates that the obtained values root test Statistics
in the probability based on MacKinnon (1996) one-sided -3.568308*
p-values of both tests are the first one (0.9881) higher -2.921175**
than the considered significance level. While the last one -2.598551***
(0.0000) is less than 0.05. Therefore, the data are non- t-Statistics Prob.
stationary in the first test. Rather, stationary in the second In first ADF t- -4.782792 0.0003
evaluation. difference Statistics
unit root test -3.571310*
Table 2 -2.922449**
Augmented Dickey-Fuller Test of Population -2.599224***
Growth at constant with trend and intercept model. Dickey-Fuller Test of the Economic Growth at constant
t-Statistics Prob. intercept model. In the first evaluation, the series has a root
In level unit ADF t- -0.312627 0.9881 (non-stationary). While in the second test which is in first
root test Statistics difference the series is stationary because its mean and
-4.152511* variance do not depend on time.
-3.502373**
-3.180699*** Meanwhile, Table 4 shows that the lag 1 is the suitable
t-Statistics Prob. lag length to use based on all the listed criteria. Thus, in the
In first ADF t- -6.541487 0.0000 successive steps, the researcher used a lag length of 1 as the
difference Statistics above table has shown.
unit root test -4.156734*
-3.504330** Accordingly, the series of Economic Growth at
-3.181826*** constant with trend and intercept model in level is non-
*at 1%, ** at 5% and *** at 10% critical values. stationary hence a root exists and its mean and variance
depend on time at any significance level. Rather, in the
Table 3
evaluation in first difference unit root, we have to deny the
Augmented Dickey-Fuller Test of Economic Growth at
null hypothesis and say that the series has no root.
Therefore, it is in a stationary form. *indicates significance at 0.05 level.

Table 4
Similarly, Table 6 shows that only the second
VAR Lag Order Selection Criteria.
probability based on MacKinnon (1996) one-sided p-value
Lag LogL LR FPE AIC SC HQ
(0.0724) is higher than the significance level of 5%.
0 86.325 NA 6.79 -3.922 -3.84 -3.89
Therefore, there is at most one cointegrating equation
between the two variables.
1 285.07 369.7* 7.91 * -12.98* -12.73* -12.88*

Table 6
2 286.12 1.861 9.08 -12.84 -12.43 -12.69
Johansen Cointegration Test – Maximum Eigenvalue
Test
3 286.24 0.1910 1.09 -12.66 -12.08 -12.45

Hypothesized Max-Eigen 0.05 Prob.

4 287.38 1.8031 1.26 -12.52 -11.79 -12.25
No. of CE(s)
Statistic Critical
5 291.88 6.7004 1.24 -12.55 -11.65 -12.22 Value
None* 17.53393 14.26460 0.0147
6 292.50 0.8627 1.47 -12.39 -11.33 -12.00 At most 1 3.226592 3.841466 0.0724

7 294.3 2.3886 1.67 -12.29 -11.06 -11.84

Table 7 illustrates the obtained probability for each
null hypotheses which are 0.1419 and 0.0430. Which means
8 295.71 1.661 1.94 -12.17 -10.78 -11.659
that since only the second one is smaller than 0.05 its null
hypothesis is proven to be false. Thus, GDP Granger Cause
*indicates lag order selected by the criterion
POPULATION.

Accordingly, the Granger Causality Test’s outcomes

Table 5 reveals that the first null hypothesis can be
wherein the null hypothesis of GDP does not Granger Cause
rejected given that its trace statistic is higher than the one of
Population can be rejected unlike in the case of Population
the critical value at 0.05. Therefore, it exists one
does not Granger Cause GDP’s null hypothesis which
cointegrating equation between the two variables.
cannot be rejected.

As shown, the Johansen Cointegration using the Trace

Test method and it reveals that between the two variables
Table 7
there is one cointegrating equation.
Granger Causality Test
Null Hypothesis: Obs F-Statistic Prob.
Table 5
POPULATION does not 50 2.23180 0.1419
Johansen Cointegration Test – Trace Test.
Granger Cause GDP
Hypothesized Trace 0.05 Prob.
GDP does not Granger Cause 4.32517 0.0430
No. of CE(s)
Statistic Critical POPULATION
Value
None* 20.76052 15.49471 0.0073
At most 1 3.226592 3.841466 0.0724
 Table 9 imports fall in the rejection region. While the exports’ t-
Multiple Regression Analysis between Population Statistics lies in the acceptance region.
Growth, Exports, and Imports Summary Outputs As shown, the corresponding t-statistic of the
Coefficients Standard t-Stat P-value exports (-0.984445353) is greater than the critical values
Error from the t table distribution which are -2.011 and 2.011.
Rather, the t-stat value of imports (3.322177096) is higher
Intercept
39.68 2.95 13.41 7.4585E-18 than the considered critical value. Thus, its partial
Exports regression coefficient is not equal to zero which in turn
-7.85E-06 7.97E-06 -0.9844 0.329832971
Imports means that it is a significant independent variable in the
2.44E-05 7.3E-06 3.32217 0.001714109
study.

Table 9 shows the results of the Multiple Regression

Analysis and it reveals that only the t-statistics of the

3. Conclusion [5] Fukuoka, F. (2010). Philippine Journal of Development.

Based from the outcomes of this research, the
association between the population and the economic
growth of the Philippines persist to be unidirectional despite
a huge increment in the population which is 15,624,600.
Moreover, this result contradicts the principle of Hess and
Adam Smith who stated that a massive expansion of the
population can affect the economic progress of the country.
(Hess, 2013). Additionally, this paper was able to
demonstrate that the imports are some of the determinants
Population Growth and Economic Development: Empirical
Evidence from the Philippines, Volume XXXVII (No.1), p.
82-84.
[6] Hess, P. (2013). Introduction to economic growth. Economic
Growth and Sustainable Development (p. 3, pp. 18-19, p. 24
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[7] Hess, P. (2013). Introduction to population growth.
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& pp. 43-45). Oxon, England: Routledge.
[8] Hess, P. (2013). Classical Theories of Economic Growth.
Economic Growth and Sustainable Development (pp. 61-
71). Oxon, England: Routledge.

that have caused such relationship between the two
variables. Instead, the exports can be eliminated to the study
because it has been proven that there is no correlation
between them and the population growth.
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