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    Autocorrelation

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    PRIYAL MUNDHRA
    This document analyzes the autocorrelation in a dataset containing Australia's final consumption expenditure and adjusted national income from 2005-2019. 1. A linear regression model shows a very strong correlation (R^2 = 0.9958) between consumption and income. 2. The Durbin-Watson test statistic of 0.0256 is less than the lower critical value of 1.08, indicating positive autocorrelation in the residuals. 3. Therefore, the hypothesis of no positive autocorrelation is rejected, and it is concluded that there is autocorrelation present in the dataset.

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    Autocorrelation

    Uploaded by

    PRIYAL MUNDHRA
    30 views2 pages
    This document analyzes the autocorrelation in a dataset containing Australia's final consumption expenditure and adjusted national income from 2005-2019. 1. A linear regression model shows a very strong correlation (R^2 = 0.9958) between consumption and income. 2. The Durbin-Watson test statistic of 0.0256 is less than the lower critical value of 1.08, indicating positive autocorrelation in the residuals. 3. Therefore, the hypothesis of no positive autocorrelation is rejected, and it is concluded that there is autocorrelation present in the dataset.

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    This document analyzes the autocorrelation in a dataset containing Australia's final consumption expenditure and adjusted national income from 2005-2019. 1. A linear regression model shows a very strong correlation (R^2 = 0.9958) between consumption and income. 2. The Durbin-Watson test statistic of 0.0256 is less than the lower critical value of 1.08, indicating positive autocorrelation in the residuals. 3. Therefore, the hypothesis of no positive autocorrelation is rejected, and it is concluded that there is autocorrelation present in the dataset.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    30 views2 pages

    Autocorrelation

    Uploaded by

    PRIYAL MUNDHRA
    This document analyzes the autocorrelation in a dataset containing Australia's final consumption expenditure and adjusted national income from 2005-2019. 1. A linear regression model shows a very strong correlation (R^2 = 0.9958) between consumption and income. 2. The Durbin-Watson test statistic of 0.0256 is less than the lower critical value of 1.08, indicating positive autocorrelation in the residuals. 3. Therefore, the hypothesis of no positive autocorrelation is rejected, and it is concluded that there is autocorrelation present in the dataset.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    Autocorrelation

    Priyal Mundhra(21060242058)

    1. Dataset
    The following data is the final consumption expenditure and adjusted national income of
    Australia for 2006-2019 expressed in current US$. As per definitions given by the World
    Bank, Final consumption expenditure (formerly total consumption) is the sum of household
    final consumption expenditure (private consumption) and general government final
    consumption expenditure (general government consumption) and; Adjusted net national
    income is GNI minus consumption of fixed capital and natural resources depletion.

    Year Final_consumption_expenditure Adjusted_net_national_income


    2005 52131784694.84 54069038391.54
    2006 553660527103.92 576387861957.42
    2007 631914893617.02 651072944831.94
    2008 778718889883.62 803336222497.94
    2009 671658813135.03 723361413158.73
    2010 850186734783.76 886410571895.34
    2011 1012941930395.35 1078643958582.76
    2012 1121053825531.04 1215668643545.95
    2013 1156923155842.82 1247069572099.66
    2014 1081270540714.22 1144175543456.83
    2015 1017203594309.01 1056290293181.08
    2016 929645508807.69 946766793192.11
    2017 1001547628026.25 1034183380361.74
    2018 1075951476629.72 1106747125595.05
    2019 1037532541839.51 1069193708469.21

    2. Regression Model
    The output is as:
    SUMMARY OUTPUT

    Regression Statistics
    Multiple R 0.997900652
    R Square 0.995805711
    Adjusted R Square0.995483073
    Standard Error 19649936414
    Observations 15

    ANOVA
    df SS MS F Significance F
    Regression 1 1.19174E+24 1.19E+24 3086.452 7.66823E-17
    Residual 13 5.01956E+21 3.86E+20
    Total 14 1.19676E+24

    Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0%Upper 95.0%
    Intercept 13391726932 16143659507 0.829535 0.421773 -21484529067 48267982931 -2.1485E+10 4.83E+10
    Adjusted_net_national_income
    0.939535913 0.016911557 55.55585 7.67E-17 0.903000716 0.976071111 0.903000716 0.976071
    The regression equation can be written as:

    Final consumption expenditure = 13391726932 + 0.94(Net National Income)

    The R² value is 0.9958 which means that 99.58% variation in consumption can be explained
    by the income.

    3. Autocorrelation
    To check for Autocorrelation in the dataset we first consider our hypothesis and then
    perform the Durbin Watson test.
    H0: There is no positive autocorrelation
    H1: There is positive autocorrelation

    The following table shows the calculation for the test and the hence found D-value:

    Residuals Numerator Denominator


    -12059745603 1.45437E+20
    -1268296123 1.16455E+20 1.60858E+18
    6816752842 6.5368E+19 4.64681E+19
    10563931466 1.40413E+19 1.11597E+20
    -21356939750 1.01894E+21 4.56119E+20 Durbin-
    3980441634 6.41983E+20 1.58439E+19 Watson 0.025616
    -13874533281 3.188E+20 1.92503E+20 Value =
    -34502250676 4.25503E+20 1.19041E+21
    -28135220451 4.05391E+19 7.91591E+20
    -7115200406 4.41841E+20 5.06261E+19
    11389202071 3.42413E+20 1.29714E+20
    26732378159 2.35413E+20 7.1462E+20
    16503474314 1.0463E+20 2.72365E+20
    22731078268 3.87831E+19 5.16702E+20
    19594927534 9.83544E+18 3.83961E+20
    SUM 3.81455E+21 5.01956E+21

    Here, n = 15, and from the Durbin-Watson table we get d L = 1.08 and dU = 1.36. Here the D-value is
    lesser than the dL hence the hypothesis for the first order positive autocorrelation is accepted.
    Therefore, there is autocorrelation in this dataset

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