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INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS
Table 1: Dickey-Fuller (DF)/Augmented Dickey-Fuller (ADF) Test for Unit Root
JANURAY 2011
VOL 2, NO 9
Augmented Dickey-Fuller (ADF) Test
Variables at Level Variables at 1 st Difference
Without Trend & Without Trend &
Trend (k) Intercept (k) Trend (k) Intercept (k)
Ln NYt -1.619 (0) -2.202 (0) -4.554* (1) -5.375* (1)
Ln CFt -1.679 (0) -1.736 (0) -4.542* (1) -5.535* (1)
Ln ELFt -0.502 (0) -2.407 (0) -6.037* (0) -5.987* (0)
Ln HCt -0.129 (0) -1.692 (0) -4.627* (0) -4.572* (0)
Ln MXt -1.9015(0) -2.057 (0) -5.348* (0) -5.879* (0)
Ln SMXt -1.997 (0) -2.382 (0) -5.525* (0) -5.575* (0)
Ln PXt -1.889 (0) -2.231 (0) -5.777* (1) -5.683* (1)
Ln CMt -1.156 (0) -2.042 (0) -5.558* (0) -5.836* (0)
Notes: The null hypothesis is that the series is non-stationary, or contains a unit root. The rejection of null
hypothesis for ADF test is based on the MacKinnon critical values and numbers in parentheses indicate number
of lags (k) based on Schwarz Information Criterion (SIC).
* Indicates the rejection of the null hypothesis of non-stationary at 5% significance level.
When the ADF test is conducted at first difference of each variable, the null hypothesis
of non-stationary is easily rejected at 5% significance level as shown in Table 1. This is
consistent with some previous studies 4 which demonstrated that most of the macroeconomics
and financial series are expected to contain unit root and thus integrated of order one, I(1).
Therefore, variables are integrated of order one, and a higher order of differencing is not
required to perform. Since the variables are integrated of same order, I(1) , so, multivariate
cointegration test for long run analysis could be conducted.
5.2 Empirical Results for Short and Long Run Dynamics
5.2.1 Long Run Dynamics
The results of the Johansen‘s cointegration test for Net Income, Physical Capital,
Labor, Human Capital and components of total Exports (Manufacturing exports, semimanufacturing
exports and primary exports) using both the �trace and the � max statistics are
given in Table 2. Starting with the � max test results reported in Table 2, the null hypotheses r =
0 and r � 1 (no cointegration) can be rejected in favor of r = 1 and r = 2 respectively, indicates
the presence of two cointegrating relationships between NYt, Kt, Lt, Ht, CMt, MXt, SMXt, and
PXt. For the trace test results, the null hypotheses r = 0, r � 1, r � 2, and r � 3 can be rejected in
favor of r � 1, r � 2, r � 3 and r � 4 implies that there are at least four cointegrating vectors
between NYt, Kt, Lt, Ht, CMt, MXt, SMXt, and PXt at 5% level of significance.
4 See for example Ahmad et al. (2004), Akbar .M and Z. F.Naqvi (2000), Ahmad at al. (2000)
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