ECO 545 ECONOMETRICS

INDIVIDUAL ASSIGNMENT

FACULTY / PROGRAMME : BA250

NAME : HARIZ RIDHWAN BIN NAZILLAH

MATRIC NO. : 2020237604

GROUP : N4BA2506

LECTURER : SIR BASHIR AHMAD BIN SHABIR AHMAD

SUBMISSION DATE :4th FEBRUARY 2023

 ACKNOWLEDGEMENT

First and foremost, praises and thanks to Allah S.W.T., the almighty God, for His showers of blessings
throughout my assignment and complete it on time. I am very thankful for completing our assignment
as one of the required assessments for the ECO545 Econometrics.

I would like to express my deep and sincere gratitude to my lecturer, Sir Bashir Ahmad Bin Shabir
Ahmad for giving me the opportunity and guidance by providing invaluable information and
motivation throughout the semester. It was a great privilege and honor to study under his guidance.
Apart from that, abundant of thanks to my family, all my classmates and friends who have deeply
inspire me in order to complete this paperwork. I am forever in debt and extremely grateful for their
understanding.
.

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CONTENTS
SECTION 1 : INTRODUCTION ................................................................................................................... 4
SECTION 2 : PROBLEM STATEMENT ........................................................................................................ 5
SECTION 3: LITERATURE REVIEW ............................................................................................................ 6
SECTION 4 : RESEARCH METHODOLY...................................................................................................... 8
SECTION 5: RESULT INTERPRETATION .................................................................................................... 9
SECTION 6: SUMMARY .......................................................................................................................... 13
SECTION 7: REFERENCES ....................................................................................................................... 14
SECTION 8: DATA SET ............................................................................................................................ 15

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SECTION 1 : INTRODUCTION

Egypt, country located in the northeastern corner of Africa. Egypt’s heartland, the Nile River valley
and delta, was the home of one of the principal civilizations of the ancient Middle East and, like
Mesopotamia farther east, was the site of one of the world’s earliest urban and literate societies.
Without the Nile River, all of Egypt would be desert. Only about an inch (2.5 centimeters) of rain falls
throughout Egypt each year. Egypt is often divided into two sections; Upper Egypt in the south and
Lower Egypt in the north. The sections are named this way because the Nile flows from south to
north. The river empties into the Mediterranean Sea. Southern Egypt's landscape contains low
mountains and desert. Northern Egypt has wide valleys near the Nile and desert to the east and
west. North of Cairo, the capital, is the sprawling, triangular Nile River Delta. This fertile land is
completely covered with farms.

About 90 percent of Egyptians are Muslim, which means they are followers of the Islamic religion.
About 10 percent of Egyptians are Copts, one of the oldest branches of the Christian religion. Egypt's
population is growing rapidly. This puts strains on Egypt's resources, since most people live in a
narrow strip of land along the Nile River. Having so many people in such a small area can cause
overcrowding, from schools to apartment buildings to hospitals. Children are highly valued in Egypt,
especially in rural areas where they help on family farms. Children are also expected to look after
their parents in their old age.

Egypt's geography, population, history, and military strength have made it highly influential in the
region. Egypt is a democratic republic, although some critics claim that it is not truly democratic.
Until 2005, there was never more than one presidential candidate to vote for. Along with oil and gas
exports, Egypt's tourism industry remains a key part of its economy. Here in Egypt, many reforms
undertaken since 2003 have been positive for the country’s economy, for example, reducing
customs and tariffs, lowering corporate taxes from 40% to 20%, and depegging the Egyptian Pound
to let its value trade on international currency exchanges. But despite the size and growth of its
economy, many characteristics of a developing country still apply to Egypt.

From the early 1950s, the government adopted an import substitution, state-led growth
development policy. Initially, the strategy produced modest growth rates averaging 3.5 percent a
year during 1952–73.3 The twin oil shocks (1973 and 1979) created a regional boom that had direct
effects on Egypt (through higher oil revenues), as well as indirect effects (through workers’
remittances, foreign aid, and tourism), resulting in abundant financing for investment. Growth was
also fueled by the “injitah” (open-door) reform policies starting in 1975, in which the private sector
was accorded wider scope for operations, and by a series of laws encouraging investment, inter alia,
through incentives.4 As a result of these factors, real GDP grew sharply, averaging 8.4 percent a year
between 1974-1975 and 1984-1985.

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SECTION 2 : PROBLEM STATEMENT

This paper examines several key macroeconomic variables of Egypt's economic growth from 1950 to
1990. Data was collected in time series data and then generated and interpreted using E views V12.
The data show gross domestic product (LGDP) as a dependent variable and the rest; population
(LPOP), government expenditure (LGE), consumption (LCONS), investment (LINV), and next export
(LNEX) as a independent variables. However, in economy, variables tend to affect each other. This
research paper aim to capture the impact of the those independent variable on the gross domestic
product. GDP as in popular definition is the monetary value, in local currency, of all final economic
goods and services produced in a country during a specific period. It is the broadest financial
measurement of a nation's total economic activity. The total goods and services bought by
consumers encompass all private expenditures, government spending, investments, and net exports.

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SECTION 3: LITERATURE REVIEW

In theory, consumption, government expenditure, investment, net export and population are known
to have a relationship on economic growth. Numbers of research had been done to determined
these relationships. However, these results are varrying. This is due to a different of data set used
such as period or country involved and method used to obtained the result during the research. The
table below shows the number of several researches and articles on the said variables.

NO Author(s) Countries Findings

1 Naftaly Mose, Impact of East Africa Consumption
Public Consumption on expenditure negatively
Economic Growth, associated with growth.
University of Eldoret,
2021
2 Daniel J. Mitchell, The U.S Large and growing
Impact of Government government is not
Spending on Economic conducive to better
Growth, Backgrounder, economic performance.
1831
3 Maarten Dossche, Euro Private consumption has
Magnus Forsells, Luca been a main driver of
Rossi and Grigor the recent economic
Stoevsky, Private expansion, but there is
Consumption and its still scope for further
driver in the current growth.
economic expansion,
2018
4 Samuel H. Preston and Asia Pacific No dramatic new
Peter Donaldson, analysis of the
Population Growth and relationship between
Economic Development population growth and
Asia-Pacific Population economic development.
Journal, Vol 1, No. 2,
1986
5 Wong Hock Tsen and Asian The relationship
Fumitaka Furuoka, The between population and
Relationship between economic growth is not
Population and straightfoward either
Economic Growth in can be beneficial or
Asian Economies, 2005 detrimental to economic
growth.
6 Edmore Mahembe, NM Global Through exogenous and
Odhiambo, Foreign endogenous growth
Direct Investment and analysis, it was noted
Economic Growth: A that FDI contributes
directly and indirectly to

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 Theoretical Framework, economic growth, and
2014 that the host country’s
growth may attract
more FDI.
7 Mohammad SUBHAN, INDIA The Indian export sector
Majed ALHARTHI, Md has been found to have
Shabbir ALAM, Prabha a significant and positive
THOUDAM, impact on economic
Khaliquzzaman KHAN, growth and other long-
Relationship between term economic
Exports, Economic activities.
Growth and Other
Economic Activities in
India: Evidence from
VAR Model, 2021
8 Diana Nabila Chau Malaysia Export was found to be
Abdullah, Mohd a catalyst for economic
Shahidan Shaari, Nor growth. Any trade
Ermawati barriers
Hussain, Investigating that can threat export
the Causal Relationship should be reduced for
between Export the intensification of
and Economic Growth: economic growth.
A Malaysian
Perspective, 2017

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SECTION 4 : RESEARCH METHODOLY

This study uses time series data from the World Development Indicators database for Egypt. This
paper examines several key macroeconomic indicators of Egypt's economic growth. E views V12
were used to generate and interpret the data. The results obtained by using several model methods,
such as descriptive analysis to determine the mean, median, and standard deviation of each
variables. In order to find the fluctuation of every variable, I use the linear graph function while the
correlation model is used to analyze the relationship between dependent variable and independent
variables. The last model is using equation estimation to show the result of the data. To see whether
the data is significant, we can interpret by using R2 and adjusted R, f-statistic, and prob (f-statistic).
Variables for macroeconomic indicators and economic growth were selected based on the availability of data
for the period 1950 to 1990 using annual data.

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SECTION 5: RESULT INTERPRETATION

Date: 01/18/23 Time: 18:22

Sample: 1950 1990

LGDP LCONS LGE LINV LNEX LPOP

Mean 17.05991 16.67907 15.70597 13.78165 12.57428 10.23588

Median 16.85513 16.46209 15.54580 13.52934 12.58203 10.15933
Maximum 18.42306 17.99994 17.21575 15.29950 13.69791 10.86716
Minimum 16.53734 16.18066 14.99556 13.10332 10.58490 9.974458
Std. Dev. 0.579504 0.546691 0.690745 0.662009 0.961011 0.265200
Skewness 1.501966 1.668464 1.080450 1.357522 -0.799477 1.548628
Kurtosis 4.510480 4.968221 3.550097 4.133106 3.056109 4.749646

Jarque-Bera 4.239435 5.628369 1.864535 3.245772 0.959925 4.745344

Probability 0.120066 0.059954 0.393660 0.197328 0.618806 0.093231

Sum 153.5392 150.1116 141.3538 124.0349 113.1685 92.12291

Sum Sq. Dev. 2.686595 2.390967 3.817028 3.506045 7.388339 0.562647

Observations 9 9 9 9 9 9

TABLE 1

Mean

Mean is the most used measure of central tendency. In other word we can called it as an average of
a summed numbers. The results are obtained and generated by EViews v12 and shown above. As we
can see, the total mean for GDP is 17.05991, Consumptions is 16.67907, Government Expenditure is
15.70597, Investment is 13.78165, Net Export is 12.57428 and Population is 10.23588 respectively.

Median

The median is the middle number in a sorted, ascending or descending, list of numbers and can be
more descriptive of that data set than the average. The results are obtained and generated by
EViews v12 and shown above. As we can see, the total median for GDP is 16.85513, Consumptions is
16.46209, Government Expenditure is 15.54580, Investment is 13.52934, Net Export is 12.58203 and
Population is 10.15933 respectively.

Standard Deviation

Standard deviation tells you how spread out the data is. It is a measure of how far each observed
value is from the mean. If the data points are further from the mean, there is a higher deviation
within the data set; thus, the more spread out the data, the higher the standard deviation. The
results are obtained and generated by EViews v12 and shown above. As we can see, the total GDP is
0.579504, Consumptions is 0.546691, Government Expenditure is 0.690745, Investment is 0.662009,
Net Export is 0.961011 and Population is 0.265200 respectively.

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20

18

16

14

12

10

8
1950 1955 1960 1965 1970 1975 1980 1985 1990

LGDP LCONS LGE

LINV LNEX LPOP

FIGURE 1

As shown in the linear graph above, it shows the trend of GDP, Consumptions, Government
Expenditure, Investment, Net Export and Population for Egypt from 1950 until 1990. From the linear
graph shown, we can see the trend LGDP is increasing through-out the studied year. This results tell
us that the economy is expanded every year even though in slow rate. The same thing happens for
Consumption (LCONS), Government Expenditure (LGE), and population (LPOP). The trend line for
these three data is in increasing rate. In term of investment (LINV), the linear graph tells that the
trend is fluctuating. Egypt’s investment rate has been significantly lower than in other developing
country regions. In particular, after initially outperforming comparator regions (including the Asian
region), Egypt’s investment rate lagged since the late 1980s. Moreover, despite the momentum of
the past few years, the rate remains below the developing country average. Over the past several
decades the country faces difficulties to attract investor and the factors that may affected them
probably due to interwar problem, political stability, foreign- exchange market or government
policies. Lastly, the trend line for net export (LNEX) shows that it is in fluctuate trend. The causes for
this condition is clearly because the country heavily depended too much on import activity than
export their product. Although Egypt economy relies on a variety source of internal resources such
as tourism, natural gas, and agriculture, they still heavily dependent on imports. In addition, the
economic downturn globally also to some extent affected the import export activities in Egypt such
as oil-price crisis in mid 1980s.

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 LGDP LCONS LGE LINV LNEX LPOP

LGDP 1.000000 0.997449 0.990899 0.993811 -0.025095 0.996522

LCONS 0.997449 1.000000 0.980191 0.987874 -0.063731 0.996545
LGE 0.990899 0.980191 1.000000 0.989772 -0.008702 0.984212
LINV 0.993811 0.987874 0.989772 1.000000 -0.037595 0.988588
LNEX -0.025095 -0.063731 -0.008702 -0.037595 1.000000 -0.064138
LPOP 0.996522 0.996545 0.984212 0.988588 -0.064138 1.000000
TABLE 2

The table above shows the correlation between dependent variable (GDP) and independent
variables namely consumption, government expenditure, investment, net export and population. As
we can see, Net Export (LNEX) has a negative relationship with all variable. It explains that, the
export activities in Egypt has zero relationship to the growth of nation income. Egypt economic is
known as an import dependent nation for a while. The collapse of world oil prices in the mid-1980s
also play an important role as why Egypt net export is in deficit. In early 1950s, Egypt adopted
import substitution that decreased their dependency on developed nation. This action may affected
them in term of lack foreign investment. While the other independent variable has a significance or
close relationship that affected the Egypt GDP. For instance, consumptions has a higher correlation
towards GDP with 0.997449, followed by population with 0.996522, investment with 0.993811 and
government expenditure with 0.990899. This prove that these four independent variable is strongly
can influence Egypt economy.

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Dependent Variable: LGDP
Method: Leas t Squares
Date: 01/18/23 Tim e: 18:41
Sam ple (adjus ted): 1952 1990
Included obs ervations : 9 after adjus tm ents

Variable Coefficient Std. Error t-Statis tic Prob.

LCONS 0.649256 0.051871 12.51686 0.0011

LGE 0.199221 0.025072 7.945865 0.0042
LINV 0.093430 0.030388 3.074550 0.0544
LNEX 0.013943 0.002451 5.688183 0.0108
LPOP 0.105759 0.114945 0.920081 0.4254
C 0.556471 0.340574 1.633921 0.2008

R-s quared 0.999955 Mean dependent var 17.05991

Adjus ted R-s quared 0.999881 S.D. dependent var 0.579504
S.E. of regres s ion 0.006321 Akaike info criterion -7.055286
Sum s quared res id 0.000120 Schwarz criterion -6.923803
Log likelihood 37.74879 Hannan-Quinn criter. -7.339026
F-s tatis tic 13449.22 Durbin-Wats on s tat 2.885509
Prob(F-s tatis tic) 0.000001

TABLE 3

As we can see from the table above, we categorized dependent variable as GDP (LGDP) and
consumption (LCONS), government expenditure (LGE), investment (LINV), net export (LNEX), and
population (LPOP) as independent variable. For instance, if the consumption increase by 1%, the
income of the Egypt increase by 0.6%. The other independent variable also shows positive
relationship to GDP. The nation income increase by 0.19% (government expenditure), 0.09%
(investment), 0.0139 (net export) and 0.105 (population) if the independent variable increase by 1%.
All the independent variable have a significance relationship between GDP except population as the
figure is 0.425, which is higher than the acceptable significance level; 0.05. The p-value that higher
than 0.05 shows us that the evidence is not strong enough to suggest an effect exist in measuring
Egypt economic growth is due to the population size. An effect might exist but it is possible that the
effect size is too small or there is too much variability for the hypothesis test to detect it.

In the same table, we also can see R2 value is 0.999955 with adjusted value at 0.99988. Essentially,
an R-Squared value of 0.999955 would indicate that 99% of the variance of the dependent variable
being studied is explained by the variance of the independent variable. In finance, an R-Squared
above 0.7 would generally be seen as showing a high level of correlation, whereas a measure below
0.4 would show a low correlation. Prob(F-Statistic) tells the overall significance of the regression.
This is to assess the significance level of all the variables together unlike the t-statistic that measures
it for individual variables. The null hypothesis under this is all the regression coefficients are equal to
zero. Prob(F-statistics) depicts the probability of null hypothesis being true. As per the above results,
probability is close to zero. This implies that overall the regressions is meaningful.

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SECTION 6: SUMMARY

This study examines the main macroeconomic variables of Egypt's economic growth during 1950 to
1990. E view V12 were used to generate and interpret the data. Several dependent variables such as
government spending, consumption, investment, net exports, and population have been tested to
see the impact of each variables on gross domestic product known as dependent variable. By using
several method to indicate the Egypt’s economic growth, we can see that their economy is
improving by year. The area that should be prioritise by Egypt government is to attract more
investor to invest in their domestic economy and increase their export activities to expand their
GDP. Structural measures need to be done drastically to improve the business environment that can
make Egypt a more attractive place for investors. Nonetheless, from indications over the past few
years, Egypt appears to have entered a high-growth, high-investment, and high saving trajectory.
Investment should primarily originate from the private sector with the public sector focusing on
infrastructure and social investment. Private sector investment has to become more responsive to
growth in output so that Egypt can enter into a virtuous cycle of high growth and high investment. At
the same time, the efficiency of private investment has to improve from the low levels recorded
more recently. Investment has to rely on stable and sustainable forms of financing. The recent
stabilization and reform effort implemented in Egypt over the past few years clearly illustrates that
the economy is on the right track for achieving these conditions and meeting the growth challenge.

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SECTION 7: REFERENCES

1. Daniel J. Mitchell, The Impact of Government Spending on Economic Growth, Backgrounder,

1831
2. Diana Nabila Chau Abdullah, Mohd Shahidan Shaari, Nor Ermawati Hussain, Investigating the
Causal Relationship between Export and Economic Growth: A Malaysian Perspective, 2017
3. Edmore Mahembe, NM Odhiambo, Foreign Direct Investment and Economic Growth: A
Theoretical Framework, 2014
4. https://www.elibrary.imf.org/display/book/9781557757203/ch02.xml
5. Maarten Dossche, Magnus Forsells, Luca Rossi and Grigor Stoevsky, Private Consumption
and its driver in the current economic expansion, 2018
6. Mohammad SUBHAN, Majed ALHARTHI, Md Shabbir ALAM, Prabha THOUDAM,
Khaliquzzaman KHAN, Relationship between Exports, Economic Growth and Other Economic
Activities in India: Evidence from VAR Model, 2021
7. Naftaly Mose, Impact of Public Consumption on Economic Growth, University of Eldoret,
2021
8. Samuel H. Preston and Peter Donaldson, Population Growth and Economic Development,
Asia-Pacific Population Journal, Vol 1, No. 2, 1986
9. Wong Hock Tsen and Fumitaka Furuoka, The Relationship between Population and Economic
Growth in Asian Economies, 2005

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SECTION 8: DATA SET

Year GDP in 000's $ Consumption Investment Governmemt Net export Population in 000's
expenditure
EGYPT 1950 15,365,460 12,092,617 399,502 3,042,361 -169,020 20460
EGYPT 1951 15,807,610 12,646,088 442,613 3,351,213 -632,304 20965
EGYPT 1952 15,330,294 11,175,784 490,569 3,372,665 291,276 21471
EGYPT 1953 15,208,084 10,645,659 577,907 3,254,530 729,988 21977
EGYPT 1954 15,940,447 11,907,514 621,677 3,427,196 -15,940 22483
EGYPT 1955 16,482,396 12,131,043 659,296 3,972,257 -280,201 22988
EGYPT 1956 16,904,709 12,492,580 540,951 4,141,654 -270,475 23577
EGYPT 1957 17,954,595 13,789,129 574,547 4,057,738 -466,819 24165
EGYPT 1958 18,490,491 13,701,454 628,677 3,993,946 166,414 24753
EGYPT 1959 19,766,760 13,915,799 751,137 5,060,291 39,534 25342
EGYPT 1960 20,897,279 14,105,663 731,405 5,642,265 417,946 25831
EGYPT 1961 21,661,070 15,227,732 823,121 5,891,811 -281,594 26578
EGYPT 1962 23,493,810 15,905,309 963,246 6,625,254 0 27255
EGYPT 1963 25,374,968 16,265,354 1,167,249 7,942,365 0 27946
EGYPT 1964 29,147,220 19,178,871 1,136,742 8,190,369 641,239 28660
EGYPT 1965 30,092,288 19,650,264 1,324,061 8,907,317 210,646 29387
EGYPT 1966 30,657,060 19,681,833 1,134,311 8,951,862 889,055 30204
EGYPT 1967 31,292,583 20,465,349 1,001,363 10,326,552 -500,681 30891
EGYPT 1968 33,869,840 22,523,444 914,486 11,346,396 -914,486 31595
EGYPT 1969 35,903,076 23,803,739 1,005,286 11,991,627 -897,577 32316
EGYPT 1970 38,440,639 25,639,906 1,037,897 12,916,055 -1,153,219 33053
EGYPT 1971 40,579,488 27,147,677 892,749 13,675,287 -1,136,226 33648
EGYPT 1972 41,240,612 27,589,969 948,534 13,939,327 -1,237,218 34253
EGYPT 1973 41,235,252 27,627,619 1,237,058 13,937,515 -1,566,940 34886
EGYPT 1974 41,784,175 28,120,750 1,796,720 15,084,087 -3,217,381 35561
EGYPT 1975 46,921,677 28,199,928 2,862,222 19,707,104 -3,847,578 36289
EGYPT 1976 50,836,680 29,332,764 2,846,854 20,944,712 -2,287,651 37080
EGYPT 1977 53,350,670 33,877,675 3,201,040 18,459,332 -2,187,377 37945
EGYPT 1978 56,950,410 35,935,709 3,530,925 19,932,644 -2,448,868 38874
EGYPT 1979 60,778,875 42,362,876 3,950,627 18,355,220 -3,889,848 39855
EGYPT 1980 67,239,375 47,538,238 3,899,884 19,566,658 -3,765,405 40875
EGYPT 1981 72,213,792 48,672,096 4,260,614 23,758,338 -4,477,255 41936
EGYPT 1982 74,538,352 50,238,849 4,770,455 23,181,427 -3,652,379 43036
EGYPT 1983 79,857,552 52,546,269 4,951,168 25,554,417 -3,194,302 44169
EGYPT 1984 86,489,640 56,737,204 5,448,847 28,455,092 -4,151,503 45330
EGYPT 1985 90,835,983 60,405,929 5,904,339 28,795,007 -4,269,291 46511
EGYPT 1986 91,906,338 60,566,277 5,146,755 28,950,496 -2,757,190 47694
EGYPT 1987 92,381,310 60,694,521 4,249,540 28,268,681 -831,432 48879
EGYPT 1988 94,921,344 62,458,244 4,461,303 28,381,482 -379,685 50064
EGYPT 1989 97,674,876 64,270,068 4,493,044 29,204,788 -293,025 51246
EGYPT 1990 100,238,512 65,656,225 4,410,495 29,971,315 200,477 52426

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