Applications of Robust Regression Techniques: An Econometric Approach

Dost Muhammad Khan,Osama Abdulaziz Alamri,Seema Zubair,Anum Yaqoob,Muhammad Azam Khan,Zubair Ahmad,Amer Al-Omari

doi:10.1155/2021/6525079

Abstract

Consistent estimation techniques need to be implemented to obtain robust empirical outcomes which help policymakers formulating public policies. Therefore, we implement the least squares (LS) and the high breakdown robust least trimmed squares (LTS) regression techniques, while using econometric regression model based on a growth equation for the two countries, namely, India and Pakistan. We used secondary annual time series data which covers a long period of 41 years. The adequacy of the time series econometric model was checked through cointegration analysis and found that there is no spurious regression. Classical and robust procedures were employed for the estimation of the parameters. The empirical results reveal that the overall fit of the model improves in case of LTS technique, while the significance of the predictors changes significantly in cases of both countries due to the removal of outliers from the data. Thus, empirical findings exhibit that the results, obtained through LTS, are better than LS techniques.

Highlights

Dost Muhammad Khan,1 Anum Yaqoob,1 Seema Zubair,2 Muhammad Azam Khan,3 Zubair Ahmad,4 and Osama Abdulaziz Alamri5
Since the data used in the model are time series and the error terms of time series data often suffer from autocorrelation, Newey–West HAC estimation is considered for correcting the OLS standard errors in case of unknown autocorrelation and heteroscedasticity of the errors. e Newey–West estimation procedure gives the same estimates of the regression parameters as the OLS, but different values of the standard errors result in different t-statistic and p value for testing the null hypothesis
Results reveal that the FDI inflow and gross savings have a positive, but insignificant impact on the gross domestic product (GDP) of Pakistan. e overall regression model is highly significant. e predictors explain 79.55% of the variation in the GDP per capita

Summary

Introduction

Dost Muhammad Khan ,1 Anum Yaqoob, Seema Zubair, Muhammad Azam Khan, Zubair Ahmad ,4 and Osama Abdulaziz Alamri. Introduction e rise in the productive capacity of goods and services over certain period of time of a particular economy is termed the economic growth It is measured in terms of gross domestic product (GDP). Saqib et al (2013) investigated the impact of FDI along with four other variables, debt, trade, inflation, and domestic investment, on the GDP of Pakistan for the period of 1981–2010. Eir findings indicate that FDI, debt, trade, and inflation hurt the GDP while domestic investment has a positive impact. Mehmood [6] explored the impact of thirteen selected factors, including FDI inflow and gross saving on the GDP of Pakistan and Bangladesh. Azam and Ahmed [8] found that FDI inflow contributes to the economic growth in ten Commonwealth of Independent States during 1993–2011

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Conclusion