Challenges in the Era of Globalization - iaabd

Research Findings
Challenges in the Era of Globalization
Edited by Emmanuel Obuah
As is customary with time series analysis, we initially examine the graphical representation of the time
series data employed in this study. Fig 1 below shows that all the variables, namely: FINDEV, DIR, ER
and OPENNESS trended upwards with varying degrees of fluctuations.
Fig 3: Graphical representation of time series data
Following Granger and Newbold (1974), and Engel and Granger (1987) assertions that many of the
variables that appear in time series econometric models are non-stationary (or are integrated variables) we
therefore perform unit root tests on the univariate time series to ascertain the stationarity or otherwise of
the series. The null hypothesis of a unit root is rejected against the one-sided alternative if the t-statistic is
more than the critical value in absolute terms. The results from the Augmented Dickey-Fuller (ADF) and
the Philips-Perron (PP) tests (Dickey and Fuller 1979; and Philips and Perron 1988) are presented in table
1 below. For all the variables, the ADF and PP tests fail to reject the null hypothesis of a unit root at 5
percent significance level. In other words, the tests indicate that the variables are nonstationary at the
level. Further differencing however shows that the variables are stationary at their first differences and are
thus integrated of order 1 i.e I (1).
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