ECS3706 Assignment 2
(COMPLETE ANSWERS)
Semester 2 2025 - DUE
18 September 2025
[Document subtitle]
[School]
[Course title]
,ECS3706 Assignment 2 (COMPLETE ANSWERS) Semester 2 2025 - DUE 18 September 2025
Course
Econometrics (ECS3706)
Institution
University Of South Africa (Unisa)
Book
Econometric Studies
ECS3706 Assignment 2 (COMPLETE ANSWERS) Semester 2 2025 - DUE 18 September 2025;
100% TRUSTED Complete, trusted solutions and explanations. For assistance,
.Ahead of the November 2025 Medium Term Budget Policy Statement (MTBPS), the Finance
Minister Enoch Godongwana warned about rising levels of unemployment and muted economic
growth. You have just learnt about the six steps in applied regression. Apply your knowledge
and show how you would explain the variation in unemployment using GDP growth, Foreign
direct investment and Government expenditure on education.
Step 1: Statement of the Problem
The Finance Minister raised concerns about rising unemployment and muted economic
growth. The research problem is to determine how GDP growth, FDI, and government
expenditure on education affect unemployment levels in South Africa.
Problem statement:
What is the impact of GDP growth, FDI inflows, and education spending on unemployment rates
in South Africa?
Step 2: Specification of the Model
Define the relationship mathematically:
Unemploymentt=β0+β1(GDPGrowtht)+β2(FDIt)+β3(EducationExpendituret)
+ϵtUnemployment_t = \beta_0 + \beta_1(GDPGrowth_t) + \beta_2(FDI_t) + \
beta_3(EducationExpenditure_t) + \epsilon_tUnemploymentt=β0+β1(GDPGrowtht)+β2(FDIt)
+β3(EducationExpendituret)+ϵt
, Unemployment (dependent variable, % of labor force).
GDP Growth (independent variable, annual growth %).
FDI (independent variable, % of GDP or inflows in USD).
Government expenditure on education (independent variable, % of GDP).
ϵt\epsilon_tϵt = error term (factors not captured by the model).
Expected signs:
GDP growth (β1<0\beta_1 < 0β1<0) → higher growth should reduce unemployment.
FDI (β2<0\beta_2 < 0β2<0) → more investment should create jobs, lowering
unemployment.
Education expenditure (β3<0\beta_3 < 0β3<0) → better skills development should
reduce unemployment.
Step 3: Data Collection
Gather secondary data for South Africa from sources such as:
World Bank / IMF / SARB: GDP growth, FDI inflows, unemployment rates.
National Treasury / StatsSA: Government expenditure on education.
Time series: Use annual data (e.g., 2000–2025) to capture trends before the MTBPS.
Step 4: Estimation of the Model
Using regression software (e.g., STATA, R, or Excel), run an Ordinary Least Squares (OLS)
regression of unemployment on GDP growth, FDI, and education expenditure.
Output will give:
Estimated coefficients (β^\hat{\beta}β^)
Standard errors, t-values, p-values
R2R^2R2 showing how much variation in unemployment is explained by the variables
Step 5: Hypothesis Testing
(COMPLETE ANSWERS)
Semester 2 2025 - DUE
18 September 2025
[Document subtitle]
[School]
[Course title]
,ECS3706 Assignment 2 (COMPLETE ANSWERS) Semester 2 2025 - DUE 18 September 2025
Course
Econometrics (ECS3706)
Institution
University Of South Africa (Unisa)
Book
Econometric Studies
ECS3706 Assignment 2 (COMPLETE ANSWERS) Semester 2 2025 - DUE 18 September 2025;
100% TRUSTED Complete, trusted solutions and explanations. For assistance,
.Ahead of the November 2025 Medium Term Budget Policy Statement (MTBPS), the Finance
Minister Enoch Godongwana warned about rising levels of unemployment and muted economic
growth. You have just learnt about the six steps in applied regression. Apply your knowledge
and show how you would explain the variation in unemployment using GDP growth, Foreign
direct investment and Government expenditure on education.
Step 1: Statement of the Problem
The Finance Minister raised concerns about rising unemployment and muted economic
growth. The research problem is to determine how GDP growth, FDI, and government
expenditure on education affect unemployment levels in South Africa.
Problem statement:
What is the impact of GDP growth, FDI inflows, and education spending on unemployment rates
in South Africa?
Step 2: Specification of the Model
Define the relationship mathematically:
Unemploymentt=β0+β1(GDPGrowtht)+β2(FDIt)+β3(EducationExpendituret)
+ϵtUnemployment_t = \beta_0 + \beta_1(GDPGrowth_t) + \beta_2(FDI_t) + \
beta_3(EducationExpenditure_t) + \epsilon_tUnemploymentt=β0+β1(GDPGrowtht)+β2(FDIt)
+β3(EducationExpendituret)+ϵt
, Unemployment (dependent variable, % of labor force).
GDP Growth (independent variable, annual growth %).
FDI (independent variable, % of GDP or inflows in USD).
Government expenditure on education (independent variable, % of GDP).
ϵt\epsilon_tϵt = error term (factors not captured by the model).
Expected signs:
GDP growth (β1<0\beta_1 < 0β1<0) → higher growth should reduce unemployment.
FDI (β2<0\beta_2 < 0β2<0) → more investment should create jobs, lowering
unemployment.
Education expenditure (β3<0\beta_3 < 0β3<0) → better skills development should
reduce unemployment.
Step 3: Data Collection
Gather secondary data for South Africa from sources such as:
World Bank / IMF / SARB: GDP growth, FDI inflows, unemployment rates.
National Treasury / StatsSA: Government expenditure on education.
Time series: Use annual data (e.g., 2000–2025) to capture trends before the MTBPS.
Step 4: Estimation of the Model
Using regression software (e.g., STATA, R, or Excel), run an Ordinary Least Squares (OLS)
regression of unemployment on GDP growth, FDI, and education expenditure.
Output will give:
Estimated coefficients (β^\hat{\beta}β^)
Standard errors, t-values, p-values
R2R^2R2 showing how much variation in unemployment is explained by the variables
Step 5: Hypothesis Testing
