Group-1-Econometrics-Report-2

FOREIGN TRADE UNIVERSITY FACULTY OF INTERNATIONAL ECONOMICS  ECONOMETRICS REPORT THE IMPACT OF SOME MACROECONOMIC FACTORS ON UNEMPLOYMENT IN ASEAN COUNTRIES DURING 2000-2018 Group 1: Duong Dai Hai – ID: 1814450033 Tuong The Phong – ID: 1814450062 Nguyen Anh Tu – ID: 1814450071 Pham Thu Ha – ID: 1814450031 Pham Duc Nam – ID: 18144500 Class: KTEE318(2-1920).1_LT Instructors: Ph.D Dinh Thi Thanh Binh Hanoi, May 2020 FOREIGN TRADE UNIVERSITY FACULTY OF INTERNATIONAL ECONOMICS  ECONOMETRICS REPORT THE IMPACT OF SOME MACROECONOMIC FACTORS ON UNEMPLOYMENT IN ASEAN COUNTRIES DURING 2000-2017 Group 1: Duong Dai Hai – ID: 1814450033 Tuong The Phong – ID: 1814450062 Nguyen Anh Tu – ID: 1814450071 Pham Thu Ha – ID: 1814450031 Pham Duc Nam – ID: 18144500 Class: KTEE318(2-1920).1_LT Instructors: Ph.D Dinh Thi Thanh Binh Hanoi, May 2020 INDIVIDUAL ASSESSMENT The individual assessment is based on each member’s attitude towards the group work Member ID number Contribution Duong Dai Hai 1814450033 18% Tuong The Phong 1814450062 18% Nguyen Anh Tu 1814450071 18% Pham Duc Nam 1814450057 18% Pham Thu Ha 1814450031 28% TABLE OF CONTENTS ABSTRACT INTRODUCTION SECTION OVERVIEW OF THE TOPIC 1.1 Unemployment and related terms 1.2 Economic theories 1.2.1 The effect of Population on Unemployment 1.2.2 The effect of Inflation rate on Unemployment 1.2.3 The effect of Foreign Direct Investment on Unemployment 1.2.4 The effect of Gross Domestic Product on Unemployment 10 1.3 Related published researches .10 SECTION MODEL SPECIFICATION 12 2.1 Methodology in the study 12 2.1.1 Method to collect and analyze the data 12 2.1.2 Method to derive the model 12 2.2 Theoretical model specification 12 2.2.1 Specification of the model .12 2.2.2 Explanation of the variables 13 2.2.3 Description of the data 14 SECTION PANEL DATA ANALYSIS 16 3.1 Choosing the most suitable model 16 3.1.1 Breusch-Pagan Lagrange Multiplier Test (LM) 16 3.1.2 Hausman Test .16 3.2 Diagnostic testing the problems of the model 17 3.2.1 Diagnosing the problem of Multicollinearity .17 3.2.2 Diagnosing the problem of Heteroskedasticity 18 3.2.3 Diagnosing the problem of Autocorrelation 18 SECTION ESTIMATED FIXED EFFECTS MODEL AND STATISTICAL INFERENCE 20 4.1 Correcting the model 20 4.2 The estimated results of fixed effects model 20 4.3 Meanings of estimated results 21 4.4 Hypothesis Testing 22 4.4.1 Testing the significance of an individual regression coefficient 𝜷𝒋 .22 4.4.2 Testing the significance of the model 24 4.5 Recommendations .26 CONCLUSION 27 REFERENCES 28 APPENDIX 29 5.1 The dataset of ten ASEAN countries during 2000 – 2018 29 5.2 Do-file 34 5.3 The STATA command’s outputs 34 TABLE OF FIGURES Figure Panel dataset declared result 34 Figure Data description 35 Figure Correlation matrix between variables 35 Figure Random Effects regression result 36 Figure Breusch-Pagan Lagrange Multiplier Test result 36 Figure Fixed Effects regression result 37 Figure Hausman Test result 37 Figure Results of variance inflation factors 37 Figure Modified Wald Test result 38 Figure 10 Wooldridge Test result for autocorrelation .38 Figure 11 Breusch-Pagan LM Test for cross-sectional correlation 38 Figure 12 Fixed Effects regression result using clustered standard errors 39 ABSTRACT Unemployment, or joblessness, is a situation in which able-bodied people who are looking for a job cannot find a job We can decide that a country’s economic is growing efficiently or not just by looking at its unemployment rate, keeping the unemployment rate at an acceptable rate is very important for economic growth In hope of providing a deeper insight, scrutinizing a specific case, our group would like to take the topic “The Impact of some Macroeconomic factors on Unemployment in ASEAN countries during 2000 – 2018” in thorough consideration This report investigates the determinants of unemployment in 10 ASEAN countries: Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam, employing the methods of panel data analysis Specifically, we aim to provide deeper analysis on the determinants of unemployment in each country Due to the limited of data resouces, we can only pick up a few prominent factors of those countries during 2000 – 2018, which are population, inflation rate, Gross Domestic Product (GDP) and Foreign Direct Investment (FDI) Our research indicates that the relationship of unemployment rate on all of four factors including population, inflation rate, GDP and FDI is negative INTRODUCTION Econometrics is the quantitative application of statistical and mathematical models using data to develop theories or test existing hypothesis in economics and to forecast future trends from historical data It subjects real-world data to statistical trials and then compares and contrasts the results against the theory or theories being tested Depending on whether you are interested in testing an existing theory or in using existing data to develop a new hypothesis based on those observations, econometrics can be subdivided into two major categories: theoretical and applied Those who routinely engage in this practice are commonly known as econometricians Unemployment is a problem that every country has to face, it has a negative impact on social and economic growth of the country Keeping it at an acceptable rate is really important and that’s also the reason why our group decided to choose this topic, to understand more about unemployment as well as reaching some solutions to minimize unemployment rate In the report, we will use the econometric model to find out the relationship among Population, Inflation rate, GDP, FDI and Unemployment rate by using collected data from world bank and others sources, whether they have positive or negative relationship And from the result, we may have some solutions to minimize the unemployment rate As Economics students, we recognize the important of econometrics in social economics In order to understand how the econometrics works in real life and to apply econometrics effectively and correctly, our group would like to develop a report under the guidance of PhD Dinh Thi Thanh Binh In this report, we used the econometrics analysis tool STATA to analyze the topic “The Impact of some Macroeconomic factors on Unemployment in ASEAN countries during 2000 – 2018” The report contains the following contents:  SECTION 1: OVERVIEW OF THE TOPIC  SECTION 2: MODEL SPECIFICATION  SECTION 3: PANEL DATA ANALYSIS  SECTION 4: ESTIMATED FIXED EFFECTS MODEL AND STATISTICAL INFERENCES  CONCLUSION  REFERENCES  APPENDIX During the process of making this report, due to the limited amount of time as well as some certain limits in understanding and data collecting, despite all the efforts, the report may hardly avoid mistakes We are always willing to receive your comments so that our group can improve and complete this report Many thanks! SECTION OVERVIEW OF THE TOPIC 1.1 Unemployment and related terms Unemployment occurs when a person who is actively searching for employment is unable to find work Unemployment is often used as a measure of the health of the economy The most frequent measure of unemployment is the unemployment rate, which is the number of unemployed people divided by the number of people in the labor force Symbolically: Unemployed rate = Unemployed people Labor force Unemployment is a key economic indicator because it signals the ability of workers to readily obtain gainful work to contribute to the productive output of the economy More unemployed workers mean less total economic production will take place than might have otherwise And unlike idle capital, unemployed workers will still need to maintain at least subsistence consumption during their period of unemployment This means the economy with high unemployment has lower output without a proportional decline in the need for basic consumption Persistence of high unemployment can signal serious distress in an economy and even lead to social and political upheaval Unemployment is classified into two fundamental types, which are Cyclical unemployment and Natural unemployment Cyclical unemployment is a type of unemployment which is related to the cyclical trends in the industry or the business cycle It occurs when there is not enough aggregate demand in the economy to provide jobs for everyone who wants to work Due to the decrease in aggregate demand, less production and consequently fewer workers are needed If an economy is doing well, cyclical unemployment will be at its lowest, and will be the highest if the economy growth starts to falter Natural unemployment is another type of unemployment which exists even at the equilibrium of labor market, or in other words, when the economic reaches its potential output by objective reasons There are four categories of natural unemployment: