Regression Model Building And Forecasting On Imports In Malaysia

Background: Linear regression analyses fall into six different kinds namely; simple
linear regression, multiple linear regression, logistic regression, ordinal regression,
multinomial regression and discriminate analysis(Ghani and Ahmad.2010).Conducting
linear regression analysis aims for analyzing and modeling relationships between a
dependent variable and one or more independent variables using various techniques.
The current study used a stepwise multiple regression which is known as a combination
of forward selection and backward elimination method. Objective: The study reported
in this paper mainly aimed at selecting the suitable controlled variables in the forecast
Malaysia’s imports. The study will be limited to six variables which are the exchange
rate, producer price index of imports of (MT), G.D.P, the value of exports of (MT), the
average of tariff tax of imports of (MT), the average sales tax of imports of (MT).
According to the data available, the time frame for this study will be determined by
using quarterly data covering the period from 1991 to 2013 (the period of building the
model). Results: Based on the results obtained from the stepwise regression method, It
was found that the dependent variable follows the normal distribution with the level of
significance 0.01.The four multiple regression models were also estimated and were
found to be all good in terms of the coefficient of determination R2.It was found that
the first and fourth models are good in terms of VIF, but the first model is the best
among all models. By performing the test of Durban Watson, results showed that the
linear model suffers from the problem of autocorrelation in residuals. However, after
treating the model and solving the problem, we obtained an effective model which does
not suffer from this problem and is capable of prediction, and consistent with the
economic theory in terms of signal parameters. It was also found that the first model is
good in terms of its predictive ability. Diagnostic measures showed that the model is
very suitable for predicting. Conclusion: it was found that only three controlled
variables which are G.D.P, the value of exports and the average of Tariff tax were
selected in this study, and consistent with the economic theory in terms of signal
parameters. This indicates that only these variables affect the value of imports of
(MTE) in Malaysia.