Academic Writing: Econometrics

Project analysis for an econometrics project; ASSIGNMENT After login, Right hand side top you will see ‘databank’ and need to click and then select Africa country of interest, variables, time period etc. All the Regression Output need to present out in the assignment. (Passwords to be supplied) TASK Feldstein-Horioka Puzzle The relationship between investment and saving has been extensively analysed since the publication of the seminal article of Feldstein and Horioka (1980) (henceforth FH). According to FH, high correlation between domestic savings and investment implies that the mobility of capital is low; this relationship is well known as the Feldstein-Horioka puzzle. Using the cross-section data of 16 OECD countries over the period 1960-1974, FH estimated the relationship between domestic investment share of GDP (ITY) and domestic saving share of GDP (STY). The null hypothesis is that under complete capital mobility the savings retention coefficient should be zero. They found that this estimate is close to unity and this implies that domestic saving is the main source of funds for investment. FH estimated the following version where is the saving retention coefficient, are country and time subscripts and (1) Collect data on ITY and STY for New Zealand or any African country and investigate the validity of the Feldstein-Horioka puzzle. In doing so, you may perform the following time series analyses: unit root, volatility, and error correction. For data collection, make use of The World Bank or International Financial Statistics. Make sure you have atleast 25 observations for ITY and STY, respectively. Assignment should not exceed 5000 words. To assist you in the completion of your assignment, use the following structure: 1) Title • Make sure it is appropriate 2) Introduction (1000 words maximum) • Include i. Your research question; i.e. the questions you seek to answer; the objectives of research ii. Motivation; explain precisely why the topic is problematic and worth discussing with reference to the literature iii. Details on the structure of the rest of the paper (10 marks) 3) A review of appropriate empirical literature (1000 words maximum) • Includes i. Review of related research to your topic (20 marks) 4) Empirical Analysis (2500 words maximum) • Include i. Data description ii. Unit root test (conventional and structural breaks) results and discussion iii. Volatility test (ARCH-GARCH and a few variants) results and discussion iv. Cointegration and error correction model (CRADF test, longrun, identification, and shortrun) results and discussion (60 marks) 5) Conclusion (500 words maximum) • Include i. Briefly summarise your findings and reflections. (10 marks) NB: It is important to provide a complete reference list. Bar-coded hardcopy submission to WF level 1 hand in box AND Electronic Submission via Turnitin.