Table 4 Bounds test for the presence of...

Table 4

Bounds test for the presence of co-integration

Dependent variables	F-statistics	Outcomes
F_CAD (CAD│BD, INF, RR, lnGDP) _{(2, 2, 0, 1, 1)}	17.376	Co-integrated
F_BD (BD│CAD, INF, RR, lnGDP) _{(2, 0, 0, 2, 2)}	9.932	Co-integrated
F _INF (INF │CAD, BD, RR, lnGDP) _{(1, 0, 1, 1, 2)}	3.140	Inconclusive
F_RR (RR│CAD, BD, INF, lnGDP) _{(1, 0, 0, 1, 2)}	3.285	Inconclusive
F_lnGDP (lnGDP│CAD, BD, INF, RR) _{(2, 0, 2, 2, 2)}	3.260	Inconclusive

Dependent variables	F-statistics	Outcomes
F_CAD (CAD│BD, INF, RR, lnGDP) _{(2, 2, 0, 1, 1)}	17.376	Co-integrated
F_BD (BD│CAD, INF, RR, lnGDP) _{(2, 0, 0, 2, 2)}	9.932	Co-integrated
F _INF (INF │CAD, BD, RR, lnGDP) _{(1, 0, 1, 1, 2)}	3.140	Inconclusive
F_RR (RR│CAD, BD, INF, lnGDP) _{(1, 0, 0, 1, 2)}	3.285	Inconclusive
F_lnGDP (lnGDP│CAD, BD, INF, RR) _{(2, 0, 2, 2, 2)}	3.260	Inconclusive

Critical bounds values
Level of significance	Lower bound I(0)	Upper bound I(1)
10%	2.45	3.52
5%	2.86	4.01
2.5%	3.25	4.49
1%	3.74	5.06

Critical bounds values
10%	2.45	3.52
5%	2.86	4.01
2.5%	3.25	4.49
1%	3.74	5.06

Note(s): Null Hypothesis (H₀): Co-integration does not exist among the series

Alternative Hypothesis (H₁): Absence of co-integration

Selection Criteria: Based on the value of F-statistic we can conclude the following conclusion

The null hypothesis is declined if the computed F-value surpasses the upper bound, indicating that co-integration occurs and the long-term relationship can be inferred

If the F-value is slighter than the lower bound, we cannot refuse the null hypothesis and can only estimate the short run relationship

If the F-value stands between upper and lower bound values the result is considered un-decidable

Source(s): Table by authors

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