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  • DETERMINANTS OF ECONOMIC GROWTH: EVIDENCE

    OF SINGAPORE (Q1 2003-Q4 2014)

    BY

    KHOO HUI KENG

    LUM WAN CHING

    NG YII YEN

    YEW SIT YENG

    A research project submitted in partial fulfillment of the

    requirement for the degree of

    BACHELOR OF FINANCE (HONS)

    UNIVERSITI TUNKU ABDUL RAHMAN

    FACULTY OF BUSINESS AND FINANCE

    DEPARTMENT OF FINANCE

    SEPTEMBER 2015

  • Determinants of Economic Growth: The Evidence of Singapore (Q1 2003 Q4 2014)__

    ii Undergraduate Research Project Faculty of Business & Finance

    Copyright @ 2015

    ALL RIGHTS RESERVED. No part of this paper may be reproduced, stored in a

    retrieval system, or transmitted in any form or by any means, graphic, electronic,

    mechanical, photocopying, recording, scanning, or otherwise, without the prior

    consent of the authors.

  • Determinants of Economic Growth: The Evidence of Singapore (Q1 2003 Q4 2014)__

    iii Undergraduate Research Project Faculty of Business & Finance

    DECLARATION

    We hereby declare that:

    (1) This undergraduate research project is the end result of our own work and that due acknowledgement has been given in the references to ALL sources of information

    be they printed, electronic, or personal.

    (2) No portion of this research project has been submitted in support of any application for any other degree or qualification of this or any other university, or

    other institutes of learning.

    (3) Equal contribution has been made by each group member in completing the research project.

    (4) The word count of this research report is 20,839 words.

    Name of Student: Student ID: Signature:

    1. KHOO HUI KENG 12ABB06144 __________________

    2. LUM WAN CHING 12ABB06849 __________________

    3. NG YII YEN 12ABB06104 ___________________

    4. YEW SIT YENG 12ABB07335 ___________________

    Date: 10 September 2015

  • Determinants of Economic Growth: The Evidence of Singapore (Q1 2003 Q4 2014)__

    iv Undergraduate Research Project Faculty of Business & Finance

    ACKNOWLEDGEMENT

    First and foremost, we would like to take this opportunity to express our deepest

    appreciation and gratitude to our projects supervisor, Ms. Kuah Yoke Chin for all the

    precious advice and guidance provided. In spite of being extraordinarily busy with her

    duties, she always took time out to hear and guide us on the correct path. Her patience in

    guiding and motivating us in this project has contributed greatly to success of this project.

    On the other hand, we would like to give our thanks to the authorities of Universiti Tunku

    Abdul Rahman (UTAR) for the good facilities and study environment provided

    throughout the completion of this project. Besides, we are truly appreciated with the

    online library system that UTAR has subscribed. It made our research easier in the sense

    of accessing to the data and retrieving the favorable journals.

    Furthermore, without a doubt, we perceive the emerging technology which helps us a lot

    during this period of time. Apart from the provided facilities in UTAR, there are some

    other online sources that providing us another way to obtain more information to make

    the whole progress of the project much efficient.

    Lastly, the appreciation will be given to our families and friends who gave us their full

    support and encouragement in finishing our project.

  • Determinants of Economic Growth: The Evidence of Singapore (Q1 2003 Q4 2014)__

    v Undergraduate Research Project Faculty of Business & Finance

    TABLE OF CONTENTS

    Page

    Copyright Page ------------------------------------------------------------------------------- ii

    Declaration ------------------------------------------------------------------------------------ iii

    Acknowledgement --------------------------------------------------------------------------- iv

    Table of Contents ----------------------------------------------------------------------------- v

    List of Tables ---------------------------------------------------------------------------------- ix

    List of Figures --------------------------------------------------------------------------------- x

    List of Abbreviations ------------------------------------------------------------------------ xi

    List of Appendices --------------------------------------------------------------------------- xii

    Preface ---------------------------------------------------------------------------------------- xiii

    Abstract --------------------------------------------------------------------------------------- xiv

    CHAPTER 1 RESEARCH OVERVIEW

    1.0 Introduction -------------------------------------------------------------------- 1

    1.1 Research Background

    1.1.1 Background of Singapore ------------------------------------------ 1

    1.1.2 Background of Economic Growth in Singapore ---------------- 4

    1.2 Problem Statement ------------------------------------------------------------ 7

    1.3 Research Question ------------------------------------------------------------- 8

    1.4 Research Objectives

    1.4.1 General Objective --------------------------------------------------- 9

    1.4.2 Specific Objectives -------------------------------------------------- 9

    1.5 Hypotheses of the Study

    1.5.1 Government Expenditure ----------------------------------------- 10

    1.5.2 Goods and Services Tax ------------------------------------------ 11

    1.5.3 Inflation ------------------------------------------------------------- 12

  • Determinants of Economic Growth: The Evidence of Singapore (Q1 2003 Q4 2014)__

    vi Undergraduate Research Project Faculty of Business & Finance

    1.5.4 Foreign Direct Investment --------------------------------------- 13

    1.5.5 Export --------------------------------------------------------------- 14

    1.6 Significant of the Study

    1.6.1 Government -------------------------------------------------------- 15

    1.6.2 Policy Maker ------------------------------------------------------- 16

    1.6.3 Macroeconomists -------------------------------------------------- 18

    1.7 Chapter Layout --------------------------------------------------------------- 19

    1.8 Conclusion -------------------------------------------------------------------- 20

    CHAPTER 2 LITERATURE REVIEW

    2.0 Introduction ------------------------------------------------------------------- 21

    2.1 Review of the Literature

    2.1.1 Economic Growth ------------------------------------------------- 21

    2.1.2 Government Expenditure ----------------------------------------- 23

    2.1.3 Goods and Services Tax ------------------------------------------ 25

    2.1.4 Inflation ------------------------------------------------------------- 26

    2.1.5 Foreign Direct Investment ---------------------------------------- 28

    2.1.6 Export --------------------------------------------------------------- 30

    2.2 Review of Relevant Theoretical Model

    2.2.1 Government Expenditure Keynesian Theory ---------------- 31

    2.2.2 Goods and Services Tax Theory of Reasoned Action ------ 32

    2.2.3 Inflation Quantity Theory of Money -------------------------- 33

    2.2.4 Foreign Direct Investment The Internalization Theory ---- 35

    2.2.5 Export Staple Theory of Growth ------------------------------ 37

    2.3 Proposed Framework -------------------------------------------------------- 39

    2.4 Conclusion -------------------------------------------------------------------- 39

    CHAPTER 3 METHODOLOGY

    3.0 Introduction ------------------------------------------------------------------- 40

    3.1 Data Collection Method

    3.1.1 Secondary Data -------------------------------------------------------- 40

  • Determinants of Economic Growth: The Evidence of Singapore (Q1 2003 Q4 2014)__

    vii Undergraduate Research Project Faculty of Business & Finance

    3.2 Sampling Design

    3.2.1 Target Population Economic Growth in Singapore -------- 42

    3.2.2 Sampling Technique Background of EView ---------------- 43

    3.3 Flow of Data Processing --------------------------------------------------- 44

    3.4 Data Analysis ---------------------------------------------------------------- 45

    3.4.1 F-test ---------------------------------------------------------------- 46

    3.4.2 T-test ---------------------------------------------------------------- 47

    3.4.3 Normality Test ----------------------------------------------------- 49

    3.4.4 Multicollinearity --------------------------------------------------- 50

    3.4.5 Heteroscedasticity ------------------------------------------------- 51

    3.4.6 Autocorrelation ---------------------------------------------------- 53

    3.4.7 Specification Bias ------------------------------------------------- 54

    3.5 Conclusion -------------------------------------------------------------------- 56

    CHAPTER 4 DATA ANALYSIS

    4.0 Introduction ------------------------------------------------------------------- 57

    4.1 Ordinary Least Square ------------------------------------------------------- 57

    4.1.1 F-test ----------------------------------------------------------------- 65

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