1.

Testing structural stability of the regression model

On 11/1/2007, Vietnam has officially become member of WTO, which might have effects on
exchange rate. We use dummy variable instead of Chow test to test for the existence of
change in structure of the model to simplify procedure. The data is divided into two periods:
one from year 1993 to 2006 and one from 2007 to 2013.
The following addictive dummy model used:
^
EXRATE t= ^1 + ^2 Dt + ^3 VNI t + ^4 lnUSI t + ^5 M t + ^6 TR GDPt
Where D=1 if 2007-2013
D=0 if 1993-2006
From table 1 we have:
^
EXRATE = 14344.16680.29 D t

117.13
+40.62

VNI t

1589.66

ln USI t

+0.001071

Mt

TR GDPt

Testing difference of the intercept

H0

: two intercepts are the same

H 1 : two intercepts are different

Test-statistics: t= -0.637 (as seen in Table1)

Decision rule:
t
H0
t
, nk
Reject
if |t|
= 0.05,15 = 2.131
2

We have: |t| = 0.637 2.131 => do not reject

H0

Therefore, there is not enough evidence to conclude that there is difference in constant
term

2. Testing higher order autocorrelation

2.1.
Second-order autocorrelation
H0
: no second-order autocorrelation
H 1 : second-order autocorrelation exists

Test-statistics:
BG-statistics = (n-p)* R

= (21 2)*0.136 = 2.584

(we take the value of

Decision rule:
H0
Reject
if BG >

x 2 , p =

in Table 2)

x 20.1, 2 = 4.6051
H0

We have: BG = 2.584 4.6051

Therefore, there is not enough evidence to conclude that second-order autocorrelation

occurs in the model.
2.2.
Third-order autocorrelation
H0
: no third-order autocorrelation

=> do not reject

H 1 : third-order autocorrelation exists

Test-statistics:
2
BG-statistics = (n-p)* R = (21 3)*0.2572 = 4.6296

(we take the value of

Decision rule:
H0
Reject
if BG >

x 2 , p =

We have: BG = 4.6296 6.2514

R2 in Table 3)

x 20.1, 3 = 6.2514

=> do not reject

H0

Therefore, there is not enough evidence to conclude that third-order autocorrelation

occurs in the model.
Table1. Dummy regression
Dependent Variable: EXRATE
Method: Least Squares
Date: 19/05/15 Time: 22:40
Sample: 1993 2013
Included observations: 21
Variable

Coefficient

Std. Error

t-Statistic

Prob.

C
DUMMY
VNI
LOG(USI)
M
TR_GDP

14344.16
-680.2964
-117.1281
-1589.666
0.001071
40.62303

2995.133
1068.275
51.56810
850.5020
0.000447
19.96893

4.789155
-0.636818
-2.271328
-1.869091
2.397087
2.034312

0.0002
0.5338
0.0383
0.0813
0.0300
0.0600

R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood

0.934423
0.912564
942.8575
13334705
-170.0920

Mean dependent var

S.D. dependent var
Akaike info criterion
Schwarz criterion
Hannan-Quinn criter.

15578.56
3188.614
16.77066
17.06910
16.83543

F-statistic
Prob(F-statistic)

42.74797
0.000000

Durbin-Watson stat

1.243863

Table2. Breusch-Godfrey serial correlation LM Test for second order

Breusch-Godfrey Serial Correlation LM Test:
F-statistic
Obs*R-squared

1.104054
2.860931

Prob. F(2,14)
Prob. Chi-Square(2)

0.3587
0.2392

Test Equation:
Dependent Variable: RESID
Method: Least Squares
Date: 19/05/15 Time: 21:59
Sample: 1993 2013
Included observations: 21
Presample missing value lagged residuals set to zero.
Variable

Coefficient

Std. Error

t-Statistic

Prob.

C
VNI
LOG(USI)
M
TR_GDP
RESID(-1)
RESID(-2)

1.549268
6.425937
-185.2020
-0.000125
2.845620
0.398898
-0.225744

2717.437
48.88775
846.4366
0.000459
18.25486
0.284729
0.289724

0.000570
0.131443
-0.218802
-0.272531
0.155883
1.400974
-0.779172

0.9996
0.8973
0.8300
0.7892
0.8784
0.1830
0.4488

R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood
F-statistic
Prob(F-statistic)

0.136235
-0.233950
919.2176
11829454
-168.8343
0.368018
0.887259

Mean dependent var

S.D. dependent var
Akaike info criterion
Schwarz criterion
Hannan-Quinn criter.
Durbin-Watson stat

-2.20E-12
827.5028
16.74612
17.09430
16.82169
1.973946

Table3. Breusch-Godfrey serial correlation LM Test for third order

Breusch-Godfrey Serial Correlation LM Test:
F-statistic
Obs*R-squared

Test Equation:
Dependent Variable: RESID
Method: Least Squares
Date: 19/05/15 Time: 22:01
Sample: 1993 2013

1.501144
5.403059

Prob. F(3,13)
Prob. Chi-Square(3)

0.2607
0.1446

Included observations: 21
Presample missing value lagged residuals set to zero.
Variable

Coefficient

Std. Error

t-Statistic

Prob.

C
VNI
LOG(USI)
M
TR_GDP
RESID(-1)
RESID(-2)
RESID(-3)

1315.031
5.843153
-889.1554
-0.000407
4.248833
0.393043
-0.061939
-0.512475

2766.263
47.04574
947.2649
0.000482
17.59284
0.274020
0.300652
0.352064

0.475382
0.124202
-0.938656
-0.843624
0.241509
1.434356
-0.206016
-1.455629

0.6424
0.9031
0.3650
0.4141
0.8129
0.1751
0.8400
0.1692

R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood
F-statistic
Prob(F-statistic)

0.257289
-0.142633
884.5510
10171596
-167.2489
0.643348
0.713993

Mean dependent var

S.D. dependent var
Akaike info criterion
Schwarz criterion
Hannan-Quinn criter.
Durbin-Watson stat

-2.20E-12
827.5028
16.69037
17.08828
16.77673
2.084975