Effect of Different Factors on Gross Domestic Product

Topics: Gross domestic product, Regression analysis, Economics Pages: 23 (7082 words) Published: March 15, 2013
Shafaqat Mehmood
Resource Mentors (Pvt,) Ltd., Lahore, Pakistan
E-mail: shafaqatphd@gmail.com, Cell# 00923334895247
This study investigates the affect of thirteen selected factors (independent variables) on Gross Domestic Product (GDP) in Pakistan and Bangladesh economy, for the purpose of comparing both countries finding, to identify with reasons, which country is in better position and why? Economic growth measured in GDP by using time series data over the period 1976/77 to 2008/09 for the last thirty-four years. GDP represent the dependent variable and independent variables taken such as gross national expenditure, final consumption expenditure, goods exports & imports, services exports & imports, external debt stocks, gross saving, FDI inflows, FDI outflows, gross domestic income, net income from abroad and worker’s remittances and compensation of employees paid. This study found that in Pakistan gross national expenditures, goods exports, gross saving and final consumption expenditure have a positive effect on the GDP. But the factors such as external debts total stock and services exports have a negative effect on the GDP of Pakistan. In case of Bangladesh, this study found that factor such as gross national expenditures, external debts stock total, goods imports and exports have positive effect on the GDP of Bangladesh but the factor as final consumption expenditure has negative effect on the GDP of Bangladesh.

Keyword: GDP, Pakistan, Bangladesh, Different Factors
1. Introduction
There are a few issues which have been long debated and have been not resolved in the literature of development economics, the affect of different factors on the GDP as economic growth is one of them. In this study GDP represent the dependent variable and 13 independent variables taken such as Gross National Expenditure (GNE), Final Consumption Expenditure (FCE), Goods Exports, Goods Imports, Services Exports, Services Imports, External Debt Stocks, Gross Saving, Foreign Direct Investment Inflows (FDI In), Foreign Direct Investment Outflows (FDI Out), Gross Domestic Income (GDI), Net Income From Abroad (NIFA) and Workers' remittances and compensation of employees paid (WRACE).

The most recognized indicators used for assessing a nation's economic growth are Gross Domestic Product (GDP), Gross National Product (GNP) and Balance of Payments (BOP). GDP is the market value of all the products and services that are produces by the people and property of a given country, for the period of one year (Afzal, 2007). GNP is the total measure of the flow of goods and services at market value resulting from current production during a year in a country, including net income from abroad (Akhtar & Tahir, 2002). BOP is overall record of accounts of all the transactions between residents or people of a country and rest of the world (Aslam, 2010).

Thought both the indicators GNP and GDP efficient but GDP is favored. In other words, GDP is more concerned towards, where the production occurred and is less concerned with, who 19 produced it (Vissak & Roolaht, 2005). The foreign direct investment (FDI) inflow into Pakistan increased from US $ 322.4 millions1 in 2000-01 to US $ 5,153 million in 2007-08. Bangladesh, one of the poorest countries in the world with a population of 144 million, counts on the inflow of foreign exchange to fund its imports. The Bangladeshi economy grew by a healthy 6.2 per cent to the year ended June 30, 2008, despite a sluggish investment climate due to a state of emergency, severe flooding and a devastating cyclone.

Gross national expenditure (formerly domestic absorption) is the sum of household final consumption expenditure (formerly private consumption), general government final consumption expenditure (formerly general government consumption), and gross capital...

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