Panel Seemingly Unrelated Regression with Dummy Variables For Economic Modeling Of Developed And Developing Country

Abstract

This study aims to identify the relationship between population density, inflation, and unemployment on the human development index, GNP, export-import, and urbanization in the category of developed and developing countries using the Panel Seemingly Unrelated Regression (Panel SUR) with a dummy variable as a slope component. This study uses economic data from 145 countries in the world obtained through the official websites of the World Bank and the International Monetary Fund. The results showed that the Fix Effect SUR model (AIC=84915.74) was better than the pooled SUR model (AIC=114936) and Random Effect SUR (AIC=1148415). The results of the analysis using the Fix Effect SUR model show that population density has a significant positive relationship with GNP, imports, and exports. There is a significant negative relationship between the unemployment rate and GNP. In addition, the results obtained show that the effect of population density on GNP in developed countries is positive and greater. The effect of the unemployment rate on GNP in developed countries is negative and greater than that of developing countries. The results of the analysis using the pooled SUR model and the Random Effect SUR are the same conclusion where population density has a significant positive relationship to GNP, imports, and exports. There is a significant negative relationship between inflation and GNP. The effect of population density and inflation on GNP, imports, and exports in developed countries is positive and greater than that of developing countries. The effect of the unemployment rate on GNP in developed countries is negative and greater than that of developing countries.