A Dynamic Model for determining Inward Foreign ... - Business School

4.2 Unit Root Test
The Augmented Dickey –Fuller test (ADF) is employed to test the data in the levels and log first differences wether the variables are stationary
or no-stationary.
Table 3: Summery Statistics of Unit Root Test
Variables t- Statistics in Levels t-statistics in Log First Differences
FDI -2.434251 -10.82526***
Financial Risk -1.710746 -13.77530***
Economic Risk -1.836278 -13.30841***
Political Risk -2.080084 -14.40819***
Banks Stock Market Price -0.950598 -11.70533***
Services Stock Market Price -1.034862 -11.63246***
Industries Stock Market Price -1.922609 -6.887888***
Stock Market Price of General Sectors -1.050766 -10.61605***
GDP 1.992962 -3.214103**
Inflation 1.375250 -10.86555***
Interest Rate -0.572853 -18.46510***
***,** indicate statistical significant at 1%, 10% level respectively
Table 3 illustrates that the result of ADF test in levels and first differences. The results of t-statistics in levels series indicate that the data are
non-stationary. In order to avoid the problem of spurious regression analysis and significant regression result from unrelated data it has been
taken the first difference for the data to become the data stationary, t-statistics in first differences show stationary data. Therefore, the problems
of non-stationary data are solved, then and can be concluded that the data are I(1) processes the model can be estimated for co-integration.
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