Econmet Paper

Christian Benedict B. ARGA 11027614 AE-FIN A Study on the Effect of Inflation, Net Income, and Energy Use to the Fossil Fuel Consumption in the Philippines An Empirical Paper Presented to The Faculty of the School of Economics De La Salle University In Partial Fulfillment of the Requirements in ECONMET Submitted by: Christian Benedict B. Arga 11027614 Submitted to: Dr. Cesar Rufino December 14, 2012 1 Christian Benedict B. ARGA 11027614 AE-FIN Table of Contents Introduction I. II. III. IV. Foundation of the Study Statement of the Problem Objectives of the Study Scope and LimitationsReview of Related Literature I. II. III. Expansion Net Income Energy Use Operational Framework I. II. Variable Descriptions A-Priori Expectations Methodology I. II. Information Gathered Model Specifications Empirical Results and Interpretation I. II. Variable Analysis Critical Assumptions 2 Christian Benedict B. ARGA 11027614 AE-FIN 1. Multicollinearity 2. Homoscedasticity 3. Non-autocorrelation Remedial M easures and Adjusted Estimated Econometric Model I. II. Healing Measures Adjusted Econometric Model Conclusions and Recommendations Bibliography Data Presentation 3 Christian Benedict B.ARGA 11027614 AE-FIN Introduction I. Foundation of the Study In this observational paper, the specialist intends to know the impacts of total compensation, swelling and vitality use on the utilization of petroleum derivatives in the nation. This task will permit the understudy to utilize different econometric ideas and an assortment of tests to decide the variables that will permit him a handy methodology regarding the matter. Petroleum product as characterized by Encyclopedia Britannica is â€Å"any of a class of materials of natural starting point happening inside the Earth’s outside that can be utilized as a wellspring of vitality. It is a hydrocarbon containing regular asset that isn't gained from plants or creatures. Petroleum product is a general term for covered flammable geologic stor es of natural materials, shaped from rotted plants and creatures that have been changed over to unrefined petroleum, coal, gaseous petrol, or overwhelming oils by introduction to warmth and weight in the world's outside layer more than a huge number of years. The exhaustion of petroleum product has been a basic issue in our economy. Not at all like vitality originating from hydroelectric force plants or windmills, the vitality obtained from petroleum derivative can't be reestablished and is gone until the end of time. Christian Benedict B. ARGA 11027614 AE-FIN II. Articulation of the Problem As said before, petroleum derivative is a non-sustainable power source. All nations on the planet are attempting their best to monitor their particular assets. The issue in this exact undertaking is that whether different factors, for example, expansion, net gain, and vitality utilization of the nation affects its utilization of petroleum derivatives. III. Targets of the Study There are differen t goals to this examination. First is to see if expansion, total compensation, and vitality use affects a country’s utilization on fossil fuels.Second, is to instruct the perusers of this paper which of the free factors influences the utilization of petroleum product the most. Furthermore, ultimately, this paper means to apply the different exercises learned in class to show the impacts of the picked factors on the petroleum derivative utilization. 5 Christian Benedict B. ARGA 11027614 AE-FIN IV. Degree and Limitations The information assembled that was utilized in this venture was constrained and just permitted the scientist to get together to 35 perceptions since certain factors need esteems for earlier years. In light of this explanation, the example size is generally little and can't be contrasted with different nations for reference.Review of Related Literature I. Expansion Inflation is characterized by Investopedia, as the rate at which the general degree of costs for m erchandise and enterprises is rising, and, in this manner, buying power is falling. National banks endeavor to stop serious expansion, alongside extreme collapse, trying to downplay the unreasonable development of costs. Swelling has influenced the pace of numerous items at which they are expended. For this venture, we will see whether expansion affects the utilization of petroleum derivatives. We need to see whether individuals would 6Christian Benedict B. ARGA 11027614 AE-FIN devour pretty much if the costs of petroleum product has been influenced by expansion. II. Overall gain Net salary, as educated in the student’s business subjects, is the cash left in the wake of taking away costs and different deductibles like expenses and enthusiasm to the all out income. We will watch if net gain affects petroleum product utilization. Possibly, a higher net gain may lead the customer to devour more or maybe, a lower total compensation may get the shopper to discover different wellsp rings of vitality which might be less expensive than petroleum derivative. III. Vitality UseFossil fuel consuming forces our vehicles and enterprises, warms and cools our structures, and runs apparatuses. It likewise creates power that we use for a wide range of purposes, for example, lights and PCs. This is very clear on the grounds that as we expend more vitality, the more non-renewable energy source we consume and the other way around. 7 Christian Benedict B. ARGA 11027614 AE-FIN Operational Framework I. Variable Description The model will contain the accompanying parts, the needy variable and the autonomous factors. The free factors are those that are exogenous in nature. It isn't influenced by any factor contained inside the model.The subordinate variable, then again, is endogenous in nature. It is influenced by all the free factors in the model. For this task, there will be three autonomous factors in particular; expansion, netincome, and vitality while the needy variable will be fossil. Table 1 : Variable Description This is the free factor. This is the fossil non-renewable energy source utilization of the Philippines from the years 1977 until 2011. It is communicated in rate. 8 Christian Benedict B. ARGA 11027614 AE-FIN This is a reliant This is GDP variable. estimated expansion by the deflator from 1977 up to 2011.This variable is communicated in the yearly rate. This is a ward is the variable. This yearly all out pay of our nation from 1977 until netincome 2011. We can see that the information has negative qualities. This is because of the information being in BoP communicated in US$. This is a ward is the variable. vitality yearly This vitality of from the 1977 utilization Philippines until 2011. This variable 9 Christian Benedict B. ARGA 11027614 AE-FIN is communicated in kilotonnes. II. From the earlier Expectations The A-Priori is a brilliant defense before real testing and investigation is finished with the information. Given that the non-renewa ble energy source onsumption is the ward/endogenous variable, we will investigate the relationship of this with the autonomous/exogenous factors. This will be introduced in the table underneath: Table 2: A-Priori Expectations Endogenous Variable: fossil Exogenous Variable Relationship Reason As swelling goes up, the costs of non-renewable energy source goes up too along these lines, the utilization of petroleum derivative will be diminished. Individuals will attempt to discover less expensive wellsprings of vitality and possibly sustainable ones are a decent attempt. swelling negative 10 Christian Benedict B. ARGA 11027614 AE-FIN netincome positive vitality positiveAs netincome builds, there will be more cash to spend along these lines it might influence the utilization of non-renewable energy source decidedly. Individuals will in general purchase more merchandise like food which expects power to cook. As vitality utilization goes up, there will be increasingly more non-renewable en ergy source that will be devoured. A large portion of the world's vitality source originates from non-renewable energy sources. Thusly, as individuals will in general devour more vitality, increasingly non-renewable energy source will be caught fire. Approach I. Information Gathered The information accumulated has been gained from the databank of the World Bank’s site. The information is from the Philippines going back from 1977 until 2011.There are a sum of 35 perceptions. This is because of the explanation that a portion of the factors need information from 1976 and further back. So to keep the consistency of this task, just 35 perceptions for each factor has been utilized. This is to guarantee that the 11 Christian Benedict B. ARGA 11027614 AE-FIN information is fair-minded and practically identical to one another. Introduced in the table beneath is the information outline from Stata12: II. Model Specifications The relapse model to be framed will be founded on instinct, fi nancial hypotheses, directed examinations and research materials identified with the goals of this paper.The autonomous factors picked will all be influencing the reliant variable, benefits, proportionately; along these lines, it is fitting to utilize the lin-lin model or the straight direct model. The evaluated econometric model dependent on the A-priori desires would resemble this: fossil=? 1 +? 2 inflation+? 3 netincome+? 4 energy+U I 12 Christian Benedict B. ARGA 11027614 AE-FIN Empirical Results and Interpretation I. Assessed Econometric Model The rundown table prior affirms that there are genuinely an aggregate of thirty-five perceptions for each variable.The information can in this way be relapsed and is tantamount for there are equivalent quantities of perceptions per variable remembered for the evaluated model. Be that as it may, so as to decide the individual commitment of every factor, the qualities ought to be as far as a similar unit of estimation. The model has been ch anged into the Log-Log model so the information is practically identical to one another. Stata12 created the missing qualities. Utilizing the Ordinary Least Squares relapse usefulness of Stata12, the accompanying table has been produced which will lead us to get our evaluated econometric model: 13 Christian Benedict B. ARGA 11027614AE-FIN The assessed model is currently: fossil=-2. 324895. 0168192inflation+. 0182493netincome+. 5711335energy+U I From doing the Ordinary Least Squares relapse, we are really taking a gander at the p-values and the r-squared qualities. The pvalue will reveal to us the hugeness of the variable while the r-squared will disclose to us the illustrative capacity. The sig