“Analyze of inflation and economic growth relationship in Burundi”

Figures & data

Table 1. Description of variables

name	description
GDP_GROWTH	GDP growth (annual %) [NY.GDP.MKTP.KD.ZG] source WDI
HOUSEHOLD_EXP	Households and NPISHs Final consumption expenditure (% of GDP) source WDI
INVEST	Gross fixed capital formation (% of GDP) [NE.GDI.FTOT.ZS] source WDI
OFFI_EXCH	Official exchange per US dollar. source WDI
INFLA_CPI	Inflation, consumer prices (annual %) [FP.CPI.TOTL.ZG]. source WDI

Table 2. Descriptive Statistics

Variable	Obs	Mean	Std. Dev.	Min	Max
GDP_GROWTH	31	1.157	3.913	−8	5.414
OFFI_EXCH	31	992.943	568.174	171.255	1915.046
HOUSEHOLD_EXP	31	86.27	6.137	74.884	94.549
INVEST	31	11.075	4.374	2.781	18.375
INFLACPI	31	10.425	8.243	−2.815	31.112

Table 3. AUGMENTED DICKEY-FULLER UNIT-ROOT TEST

	LEVEL		FIRST DIFFERENCE
Variable	With constant	With constant and drift	With constant	With constant and drift	Order of integration
GDP_GROWTH	0.0428**	0.0034***	0.0000***	0.0000***	I(0)
OFFI_EXCH	0.9762	0.6078	0.1000*	0.0084***	I(1)
INVEST	0.3605	0.0382**	0.0000***	0.0000***	I(0)
INFLA_CPI	0.0013***	0.0002***	0.0000***	0.0000***	I(0)
HOUSEHOLD_EXP	0.3127	0.0312**	0.0000***	0.0000***	I(0)

()* ()** ()***: means that the null hypothesis of non-stationarity is rejected at 10%, 5%, and 1%.

Table 4. Correlation matrix

Variables	(1)	(2)	(3)	(4)	(5)
(1) GDP_GROWTH	1.000
(2) LOG_OFFICIAL_EXCH	0.387	1.000
(3) HOUSEHOLD_EXP	0.257	−0.494	1.000
(4) INFLA_CPI	−0.366	−0.283	0.092	1.000
(5) INVEST	0.463	0.261	−0.023	−0.242	1.000

Table 5. Granger Causality Tests

Sample: 1990–2020	Observations	Chi2	Probability
INFLA_CPI does not Granger Cause GDP_GROWTH	31	7.4139	0.025
GDP_GROWTH does not Granger Cause INFLA_CPI	31	7.3451	0.025

Table 6. Selection-order criteria

Sample: 1990 – 2020 Number of obs = 31
lag	LL	LR	df	p	FPE	AIC	HQIC	SBIC
1	−27.720	216.490	25	0.000	139.585	19.090	19.519	20.530
2	−00.580	54.279	25	0.001	147.436	18.932	19.717	21.572
3	−63.561	74.039	25	0.000	114.750	18.041	19.183	21.881
4	−77.177	172.7*	25	0.000	6.8522*	13.494*	14.991*	18.534*

Table 7. Bound test

FISHER=4.869
0.1		0.05		0.025		0.01
Lower	Upper	Lower	Upper	Lower	Upper	Lower	Upper
2.45	3.52	2.86	4.01	3.25	4.49	3.74	5.06

Table 8. Cointegration test

	(1)	(2)	(3)
VARIABLES	ECT	LR	SR
Log_OFFICIAL_exch		3.337***
		(0.00815)
HOUSEHOLD_EXP		0.264*
		(0.0534)
INFLACPI		0.0848
		(0.591)
INVEST		0.442**
		(0.0289)
L.GDP_GROWTH	−0.786***
	(0.00560)
D.log_OFFICIAL_exch			8.291
			(0.417)
D.HOUSEHOLD_EXP			0.212
			(0.154)
D.INFLACPI			−0.163**
			(0.0205)
D.INVEST			−0.231
			(0.251)
Constant			−39.66**
			(0.0325)
Observations	31	31	31
R-squared	0.715	0.715	0.715

pval in parentheses

*** p<0.01, ** p<0.05, * p<0.1

Table 9. Estimation of eq 1 with the cls method (K threshold variable from 7 to 15)

	(K = 7)	(K = 8)	(K = 9)	(K = 10)	(K = 11)	(K = 12)	(K = 13)	(K = 14)	(K = 15)
VARIABLES	gdp_growth	gdp_growth	gdp_growth	gdp_growth	gdp_growth	gdp_growth	gdp_growth	gdp_growth	gdp_growth
invest	0.268**	0.279**	0.265**	0.270**	0.269**	0.269**	0.264**	0.243*	0.280**
	(0.0419)	(0.0337)	(0.0431)	(0.0350)	(0.0410)	(0.0410)	(0.0294)	(0.0667)	(0.0371)
Infla_cpi	−0.139	−0.115	−0.0473	−0.0146	−0.0625	−0.0625	0.0738	−0.0138	−0.107
	(0.141)	(0.244)	(0.642)	(0.888)	(0.573)	(0.573)	(0.485)	(0.903)	(0.372)
Lg-official_ex	2.054**	2.068**	2.239**	2.190**	2.087**	2.087**	2.199***	2.085**	2.085**
	(0.0229)	(0.0239)	(0.0158)	(0.0146)	(0.0209)	(0.0209)	(0.00954)	(0.0193)	(0.0223)
household_exp	0.294***	0.306***	0.327***	0.320***	0.312***	0.312***	0.316***	0.303***	0.312***
	(0.00838)	(0.00726)	(0.00303)	(0.00277)	(0.00388)	(0.00388)	(0.00179)	(0.00446)	(0.00455)
dummy	−5.400*	−5.178	−4.161	−5.598*	−5.318*	−5.318*	−5.923**	−5.545*	−5.033
	(0.0923)	(0.115)	(0.208)	(0.0735)	(0.0956)	(0.0956)	(0.0457)	(0.0777)	(0.111)
DINFLA7	0.847
	(0.595)
DINFLA8		0.233
		(0.884)
DINFLA9			−1.211
			(0.463)
DINFLA10				−1.880
				(0.274)
DINFLA11					−0.921
					(0.635)
DINFLA12						−0.921
						(0.635)
DINFLA13							−3.853**
							(0.0458)
DINFLA14								−2.122
								(0.332)
DINFLA15									0.0633
									(0.978)
Constant	−39.84***	−40.89***	−43.65***	−42.93***	−41.51***	−41.51***	−43.16***	−40.68***	−41.47***
	(0.00436)	(0.00426)	(0.00199)	(0.00168)	(0.00254)	(0.00254)	(0.00090)	(0.00269)	(0.00269)
Observations	31	31	31	31	31	31	31	31	31
R-squared	0.599	0.595	0.604	0.615	0.598	0.598	0.658	0.610	0.595
Resid sum sq	184.0	186.0	182.0	176.9	184.4	184.4	157.1	178.9	186.2

pval in parentheses

*** p < 0.01, ** p < 0.05, * p < 0.1

Chart 1. The Evolution of the residual sum of square according to the level of inflation dummy variable

Chart 2. The evolution of the residual sum of square the R square according to the level of inflation dummy variable

Table 10. Two stage least square (2sls) estimation

	(K=7)	(K=8)	(K=9)	(K=10)	(K=11)	(K=12)	(K=13)	(K=14)	(K=15)
variables	gdp_growth	gdp_growth	gdp_growth	gdp_growth	gdp_growth	gdp_growth	gdp_growth	gdp_growth	gdp_growth
Lg_official_exch	2.054***	2.068***	2.239***	2.190***	2.087***	2.087***	2.199***	2.085***	2.085***
	(0.00572)	(0.00615)	(0.00316)	(0.00276)	(0.00494)	(0.00494)	(0.00137)	(0.00435)	(0.00548)
household_exp	0.294***	0.306***	0.327***	0.320***	0.312***	0.312***	0.316***	0.303***	0.312***
	(0.00110)	(0.000855)	(0.000178)	(0.000151)	(0.000282)	(0.000282)	(0.00005)	(0.000362)	(0.000376)
invest	0.268**	0.279**	0.265**	0.270**	0.269**	0.269**	0.264***	0.243**	0.280**
	(0.0146)	(0.0104)	(0.0152)	(0.0111)	(0.0141)	(0.0141)	(0.00849)	(0.0290)	(0.0121)
Infla_cpi	−0.139*	−0.115	−0.0473	−0.0146	−0.0625	−0.0625	0.0738	−0.0138	−0.107
	(0.0836)	(0.174)	(0.593)	(0.871)	(0.516)	(0.516)	(0.420)	(0.889)	(0.301)
dummy	−5.400**	−5.178*	−4.161	−5.598**	−5.318**	−5.318**	−5.923**	−5.545**	−5.033*
	(0.0463)	(0.0627)	(0.141)	(0.0334)	(0.0487)	(0.0487)	(0.0166)	(0.0362)	(0.0604)
DINFLA7	0.847
	(0.541)
DINFLA8		0.233
		(0.867)
DINFLA9			−1.211
			(0.396)
DINFLA10				−1.880
				(0.203)
DINFLA11					−0.921
					(0.585)
DINFLA12						−0.921
						(0.585)
DINFLA13							−3.853**
							(0.0167)
DINFLA14								−2.122
								(0.261)
DINFLA15									0.0633
									(0.975)
Constant	−39.84***	−40.89***	−43.65***	−42.93***	−41.51***	−41.51***	−43.16***	−40.68***	−41.47***
	(0.000347)	(0.000333)	(0.00008)	(0.00005)	(0.000128)	(0.000128)	(0.00001)	(0.000143)	(0.000143)
Observations	31	31	31	31	31	31	31	31	31
R-squared	0.599	0.595	0.604	0.615	0.598	0.598	0.658	0.610	0.595
Resid_sum_sq	184.0	186.0	182.0	176.9	184.4	184.4	157.1	178.9	186.2

pval in parentheses

*** p<0.01, ** p<0.05, * p<0.1

Table

Diagnostic Test	Test statistics (p-value)	conclusion
Normality (Jarqua-Bera test)	0.74 (0.6907)	Residual are normally distributed
Serial correlation (Breusch-Godfrey LM Test)	0.076 (0.7834)	No serial correlation
Heteroscedasticity Breusch-Pagan Godfrey)	1.85 (0.1743)	No heteroscedasticity
Stability (Cusum TEST)	0.3606 (0.9479)	No instability