Building an Econometric Model for Analyzing the Correlation Between the Gdp/Capita, Government Expenditure and Income of Households, in Germany, During 1996-2010

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1. German economy overview

Germany is the largest national economy in Europe, the fourth-largest by nominal GDP in the world, and fifth by GDP (PPP) in 2008. Since the age of industrialisation, the country has been a driver, innovator, and beneficiary of an ever more globalised economy. Germany is the world's second largest exporter with $1.474 trillion, €1.06 trillion exported in 2011 (Eurozone countries are included). Exports account for more than one-third of national output.

Germany is relatively poor in raw materials. Only lignite and potash salt are available in economically significant quantities. Power plants burning lignite are one of the main sources of electricity in Germany. Oil, natural gas and other resources are, for the most part, imported from other countries. Germany imports about two thirds of its energy.

The service sector contributes around 70% of the total GDP, industry 29.1%, and agriculture 0.9%. Most of the country's products are in engineering, especially in automobiles, machinery, metals, and chemical goods. Germany is the leading producer of wind turbines and solar power technology in the world. The largest annual international trade fairs and congresses are held in several German cities such as Hanover, Frankfurt, and Berlin.

Of the world's 500 largest stock market listed companies measured by revenue, the Fortune Global 500, 37 are headquartered in Germany. In 2010 the ten largest were Volkswagen, Allianz, E.ON, Daimler, Siemens, Metro, Deutsche Telekom, Munich Re, BASF, and BMW. Other large German companies include: Robert Bosch, ThyssenKrupp, and MAN (diversified industrials); Bayer and Merck (pharmaceuticals); Adidas and Puma (clothing and footwear); Commerzbank and Deutsche Bank (banking and finance); Aldi, Lidl and Edeka (retail); SAP (computer software); Infineon (semiconductors); Henkel (household and personal consumer products); Deutsche Post (logistics); and Hugo Boss (luxury goods). Well known global brands are Mercedes Benz, BMW, Adidas, Audi, Porsche, Volkswagen, Bayer, Bosch, Lufthansa, SAP, and Nivea.

Between 1991 and 2010, 40,301 mergers & acquisitions with an involvement of German firms with a total known value of 2,422 bil. EUR have been announced. The largest transactions since 1991 are: the acquisition of Mannesmann by Vodafone for 204.8 bil. EUR in 1999, the merger of Daimler-Benz with Chrysler to form DaimlerChrysler in 1998 valued at 36.3 bil. EUR, Deutsche Telekom acquired VoiceStream Wireless Corp for 30.8 bil. EUR in 2000, the sale of T-Mobile USA Inc by Deutsche Telekom to AT&T Inc for 27.6 bil. EUR in 2011.The following data are known about the company for the years 1996 – 2010.

- The GDP/ Capita, expressed in american dollars $

- The government expenditure per inhabitant, expressed in american dollars $

- The income per household, expressed in american dollars $

The collected data is presented in the Figure 1.1. The task is to build an econometric model for analyzing the correlation between the GDP / capita, Government expenditure and Income of households, in Germany, during 1996-2010.

GDP per capita is a measurement of how prosperous a country feels to each of its citizens. To understand the definition of GDP per capita, you first need to understand GDP, which is short for Gross Domestic Product. GDP is everything that a country's economy produces in a year. GDP per capita takes a country's production, as measured by GDP, and divides it by the country's total population. Hence, it is the output of a country's economy per person.

The European Union (EU) is the world's most prosperous economy, at $14.9 trillion. It's an economy made up of 29 separate countries. Its GDP per capita was only $32,700 because it must spread the wealth among 492 million people. Japan's GDP per capita was slightly higher, at $34,000, because it can spread the benefits of its economy among only 126 million people....
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