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Evolution of GDP, Final Consumption and Net Investment in Romania During 1998-2011

A multiple regression model was used to analyze the relationship between GDP, final consumption, and net investment in Romania from 1998-2011. The regression equation found that GDP increases by 1.165488 units for every 1 unit increase in final consumption, and increases by 0.284958 units for every 1 unit increase in net investment. The model has a high probability of accuracy, around 98.89%, based on the R-squared and adjusted R-squared values. It was concluded that GDP in Romania is significantly influenced by changes in final consumption over changes in net investment.

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0% found this document useful (0 votes)
28 views

Evolution of GDP, Final Consumption and Net Investment in Romania During 1998-2011

A multiple regression model was used to analyze the relationship between GDP, final consumption, and net investment in Romania from 1998-2011. The regression equation found that GDP increases by 1.165488 units for every 1 unit increase in final consumption, and increases by 0.284958 units for every 1 unit increase in net investment. The model has a high probability of accuracy, around 98.89%, based on the R-squared and adjusted R-squared values. It was concluded that GDP in Romania is significantly influenced by changes in final consumption over changes in net investment.

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Asia Butt
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© © All Rights Reserved
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Evolution of GDP, final consumption and net investment in

Romania during 1998-2011


Consider, the three macroeconomic indicators have registered a steady growth from year to year. The
purpose of multiple regression is to highlight the relationship between a dependent variable (explained
endogenous effect) and a lot of independent variables (explanatory factors, exogenous predictors)
Multiple linear regression model equation will look like this: Y=b0+b1X1+b2X2+ in which: Y - Gross
Domestic Product- GDP; X1 - Final Consumption- CF; X2 -Net investments- INV; b0,b1,b2 - parameters
of the regression model; is a variable, interpreted as error (disturbance, measurement error). The
regression model may be rewrite under the following mathematical equation: PIB= b0+b1CF+b2INV+
We also thought that this regression model will also include free term c, which is expected to influence
dimming terms that were not taken into account when we building this model. Estimation method defined
in the program is the method of least square. Based on the above, using Eiews we obtained the following
results:
PIB = -8.927,569 + 1,165488 CF + 0,284958 INV
se = (12641.63)

(0.099731)

t-value = (-0.706204) (11.68637)


p-value= (0.4947)

R-squared = 0.988909
DW = 0.498544

(0.5634)

(0.284958)
(0.595763)
(0.0000)

Adjusted R-squared = 0.986892


F-stats = 490.3848
Prob(F-Stats)= 0.00000

From the above, multiple regression model describing the relationship between the three macroeconomic
indicators that are the subject of previously determined may be given in the form of equation as follows:

PIB = -8.927,569 + 1,165488 CF + 0,284958 INV Thus, we can say that an increasing with a monetary
unit of final consumption (with its two component - private consumption and public consumption) will
lead to an increase of 1.165488 units monetary of gross domestic product value. In case of the net
investment, the difference is more significant, we can see that every dollar invested brings an increase of
only 0.284958 dollar of the level of gross domestic product. This situation corresponds with the reality
economics of Romania because in the last twenty years the Romanian economy was based almost
exclusively on stimulating consumption and less on promotion of an investment policy correctly. The
influence of the free term as a picture of the factors that were not included in the analysis model is one
significant. In fact, it can be said, that the factors that were not included in the econometric model of
analysis, they have an significant decrease in the value of gross domestic product. The probability for this
model to be correct is very high - about 98.89%, this conclusion can be formulated on the basis of
statistical tests R-squared (0.988909) and Adjusted R-squared (0.986892).
Also the validity of the regression model is confirmed by the F test value - statistically superior value
table level that is considered to be the benchmark in the analysis of the validity of econometric models
and by the value of the test Prob (F - statistic) that it is zero. Based on observations made on the analysis
of Romania's GDP, using multiple regression model, we conclude that the value of this indicator is
significantly influenced by the variation of final consumption and net investment less variation.

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