Table 2 bounds testing for cointegration analysis 12

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Table 2 Bounds Testing for Cointegration Analysis 12 Computed F-statistic: 4.1619 (lag structure, k = 1) Critical bound’s value at 10% - Lower: 3.03 and Upper: 4.06 (Three regressors and no trends in the model) Table C1.v: Case V with unrestricted Intercept and unrestricted trend Long Run and Short Run Dynamics The long run coefficients are presented in Table 3. The estimated long-run elasticities for money supply, inflation and gross fixed capital formation are 0.18767, -0.39582, and 0.70469 respectively. Estimated elasticities have the expected signs and are statistically significant at the 10 per cent level respectively. For example, our results suggest that a 1 per cent increase in money supply induces a 0.187 per cent increase in inflation while a 1 per cent increase in Table 3 Estimated Long Run Coefficients using the ARDL Approach ARDL (2,0,1) Selected based on Schwarz Bayesian Criterion Regressor Coefficient Standard Error T-Ratio[Prob] Constant 8.2599 2.0475 4.0341[.000] MS 0.18767 0.93672 1.842973[.076] INF -0.39582 0.92505 -1.73428[.066] GFCF 0.70469 1.53661 2.06781[.0575] Notes: *** Statistical significance at 1% level; ** Statistical significance at 5% level; * Statistical significance at 10% level; Figures in parenthesis are t-ratios.
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Money Supply, Inflation and Economic Growth in Nigeria 159 inflation leads to a 0.395 per cent decline in real income. Gross fixed capital formation also positively influence real income in the long run and also significant at the 5 per cent level. In order to see the short run dynamics, the estimates of the error correction model are presented in Table 4 and the results of the long run estimates are supported. The coefficient of money supply and inflation elasticities are 0.14402 and -0.128906 respectively. In the short run, a 1 per cent price increase in money supply will increase real income by 0. 144 per cent while a 1 per cent increase in inflation will increase real income by 0.128 per cent in Nigeria. Gross fixed capital formation also positively and significantly induces real income in the short run. While money supply and capital formation influences real income positively while inflation reduces it. The error correction term ECM (t-1) is negative and statistically significant, thus corroborating the results of the cointegration tests of the existence of a long-run relationship between the variables. The error correction term is -0.490 which indicates that 49.0 per cent of the previous year’s deviation from long-run equilibrium will be restored within one year. Table 4 Error Correction Representation for the Selected ARDL Model ARDL(1,1,0,0) Selected Based on Schwarz Bayesian Criterion Explanatory Variables Coefficients Standard Error T-Ratio[Prob] Constant 2.3976 1.0197 2.3514[.026] MS 0.14402 0.13214 3.4359[.002] INF -0.128906 0.12326 -0.23450[.106] INV 0.188444 0.15052 0.58758[.0961] ECM (t-1) -0.49028 0.10485 -2.7684[.010] R-Square 0.53121 Adjusted R-Square 0.44749 S.E of Regression 0.21291 DW-statistic 1.9492 F-Stat (3,20) 7.9320[.000] Diagnostic Tests χ 2 Auto 0.03986 χ 2 Norm 13.7964 χ 2 White 0.005998 χ 2 RESET 5.9237 Notes: 1.*indicates that a coefficient is significant at the 1 per cent level; **indicates that a coefficient is significant at the 5 per cent level; ***indicates that a coefficient is significant at the 10 per cent level. Dependent Variable is LER (log of real effective exchange rates). DW is the Durbin-Watson statistic; Ser. Cor. is the Lagrange multiplier test of residual serial correlation (see Harvey, 1981); Func. Form is Ramsey's (1969) RESET test
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