Page 47 - ES 2020-21_Volume-1-2 [28-01-21]

30 Economic Survey 2020-21 Volume 1

is likely to be found even when the time-series for the two variables are independent of each
other, thus leading to spurious estimates of the correlation between the two variables. They
also illustrated that the regression residuals are likely to be autocorrelated, as evidenced by a
very low value for the Durbin-Watson (DW) statistic.
Granger and Newbold (1974) present strong evidence that regressions involving random walks
are spurious when performed on the levels, but not on the differences. Therefore, instead of
levels, using first difference i.e., ∆y = y – y avoids the problem of spurious correlations.
t-1
t
t
1.44 Table 1 shows the negative relationship between the month-on-month change in economic
indicators with the month-on-month change in stringency index, thereby corroborating that the
lockdown negatively impacted economic activity contemporaneously.

Table 1: Contemporaneous Impact of Stringency Index on Economic Indicators
Dependent Electronic toll Electronic toll Number of
Variable (MoM (ETC) (ETC) E-Way Value of E-way
Bills
Change) collection Count Bills
Stringency Index -0.528*** -0.703*** -0.239 -0.203*
(MoM Change)
(0.135) (0.156) (0.158) (0.121)
Constant 0.0760*** 0.0875*** 0.123*** 0.104***
(0.0258) (0.0298) (0.0306) (0.0233)
R 2 0.123 0.158 0.015 0.019

Source: Survey Calculation
Note: Standard errors in parentheses. * p < 0.10, ** p < 0.05, *** p < 0.01.

1.45 To capture the lagged impact of stringency on economic indicators, a three-month moving
average of stringency index has been used. The Survey see that the month-on-month change in
the three-month moving average of the stringency index has a positive relationship with the
growth in each of the economic indicators (Table 2). Thus, the initial stringent lockdown has
supported a V-shaped recovery across all the economic indicators (Figure 27 and 28).

Table 2: Impact of 3-Month Moving Average of Stringency Index on Economic Indicators
Dependent Number of
ETC
ETC
Variable (MoM collection Count E-Way Value of E-way
Bills
Change) Bills
3_MA_Stringency
Index (MoM Change) 0.560*** 0.739*** 0.678*** 0.458***
(0.0877) (0.0981) (0.0970) (0.0766)

Constant 0.191*** 0.240*** 0.207*** 0.167***
(0.0179) (0.0200) (0.0206) (0.0163)
R 2 0.274 0.345 0.248 0.194

Source: Survey Calculation
Note: Standard errors in parentheses. * p < 0.10, ** p < 0.05, *** p < 0.01.