4. The following model analyzes the impact of corruption activities on the economic growth of 100 countries. In PE = 2.410 + 1.367 In EX+ 0.222 In ST - 0.980 In DI (0.048) (0.063) (0.029) -0.3755 D₂ - 0.2799 D₂ +0.3634 D₂ + 0.567 D₂ (0.290) (0.1044) (0.166) (0.079) The figures in parentheses are the standard error of the regression coefficient Where PE = economic growth (%) EX = export growth (%) ST= total sales tax collection (RM billion) DI = foreign direct investment Corruption activity is measured using the dummy variables of the Corruption Perception Index (CPI) as follows:

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4. The following model analyzes the impact of corruption activities on the economic growth
of 100 countries.
In PE = 2.410 + 1.367 In EX+0.222 In ST - 0.980 In DI
(0.048)
(0.063)
(0.029)
-0.3755 D₂ - 0.2799 D₂ +0.3634 D3 + 0.567 D₂
(0.290) (0.1044)
(0.166)
(0.079)
The figures in parentheses are the standard error of the regression coefficient
Where
PE = economic growth (%)
EX export growth (%)
ST = total sales tax collection (RM billion)
DI = foreign direct investment
Corruption activity is measured using the dummy variables of the Corruption Perception
Index (CPI) as follows:
D₁ = 1 if CPI between 0 and 20 (very serious)
D₂= 1 if CPI between 21 and 40 (serious)
D3= 1 if CPI between 41 and 60 (average)
D4= 1 if CPI between 61 and 80 (clean)
Ds = 1 if CPI between 81 and 100 (very clean)
(a) State the reference category / benchmark category of the dummy variable in the
model.
(b) Explain the elasticity of economic growth with respect to the total sales tax
collection and foreign direct investment.
(c) Explain the impact of corruption activities on economic growth.
Transcribed Image Text:4. The following model analyzes the impact of corruption activities on the economic growth of 100 countries. In PE = 2.410 + 1.367 In EX+0.222 In ST - 0.980 In DI (0.048) (0.063) (0.029) -0.3755 D₂ - 0.2799 D₂ +0.3634 D3 + 0.567 D₂ (0.290) (0.1044) (0.166) (0.079) The figures in parentheses are the standard error of the regression coefficient Where PE = economic growth (%) EX export growth (%) ST = total sales tax collection (RM billion) DI = foreign direct investment Corruption activity is measured using the dummy variables of the Corruption Perception Index (CPI) as follows: D₁ = 1 if CPI between 0 and 20 (very serious) D₂= 1 if CPI between 21 and 40 (serious) D3= 1 if CPI between 41 and 60 (average) D4= 1 if CPI between 61 and 80 (clean) Ds = 1 if CPI between 81 and 100 (very clean) (a) State the reference category / benchmark category of the dummy variable in the model. (b) Explain the elasticity of economic growth with respect to the total sales tax collection and foreign direct investment. (c) Explain the impact of corruption activities on economic growth.
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