Energy Consumption, Economic Growth, and Trade Openness in SADC Countries
Description
Energy Consumption (ENCO) is the percentage of the population with access to electricity. GDP Per Capita (YCAP) represents the average economic output per person, adjusted for inflation, in constant US dollars. Trade Openness (TROP) represents trade as a percentage of GDP, indicating a country's trade openness. The Population (POP) variable represents a country's population growth, which may impact energy consumption. Urban population growth (URBP) represents the annual increase in the urban population. Education (EDU) as a percentage of government spending is determined by the government's education spending. Gross fixed capital formation (INV) is a proportion of GDP. Exchange Rate (EXR) is the price level of purchasing power parity (PPP) to market exchange rate conversion factor. The World Bank's Worldwide Governance Indicators are utilised to determine Political Stability (POL).
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Steps to reproduce
To reproduce the results of this research, follow these steps: 1. Model specification: Specify the three models presented in the research for estimation. Model 1 examines the relationship between energy consumption and its determinants, Model 2 focuses on the relationship between GDP per capita and its determinants, and Model 3 investigates the relationship between trade openness and its determinants. 2. Estimation procedure: To estimate the model parameters, apply the Generalized Method of Moments (GMM) estimator, specifically the Arellano-Bond GMM estimator. Use lagged values of variables as instruments to address endogeneity concerns. The difference in the data eliminates country-specific effects and uses lagged levels of endogenous variables as instruments for the differenced variables. 3. Run the regressions: Estimate the model parameters using the GMM estimator. Implement the GMM estimation for the three models separately, following the model specifications and the appropriate lagged variables as instruments. 4. Diagnostic tests: Perform the Sargan-Hansen test and the Hansen J-test to assess the validity of instrumental variables and check for potential endogeneity. Calculate the test statistics and corresponding p-values to evaluate the instruments' significance and the models' validity. Compare the obtained p-values to a predetermined significance level (e.g., 0.05) to make decisions regarding instrument validity. 5. Interpret the results: Analyze the estimated coefficients from the regressions to understand the relationships between the dependent and independent variables. Interpret the signs and significance levels of the coefficients to conclude the effects of energy consumption, GDP per capita, and trade openness on the respective determinants. 6. Validate and replicate: Validate the obtained results by comparing them with the findings presented in the research paper. Ensure the estimated coefficients, signs, and significance levels align with the original study's results.