Determinants of GDP in an Economy
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Published: Fri, 01 Dec 2017
GDP (gross domestic product) is the main indicator of any economy’s growth. Every country’s economy works for improving its GDP because it is the type of indicator which shows overall state of affairs the Economy is in or rather the conditions of the State in terms of its Economic Growth. GDP is considered as the national income of any country. GDP is the monetary value of all final goods and services produced in the country; mostly it is counted at annual basis. There are 3 approaches or methods to calculate the GDP of the country, which are as follows:
- Income approach
- Product approach
- Expenditure approach
All these have listed methods have their own significance in terms of calculating the GDP. The most widely used method by many countries to count the GDP is; the income approach. The Income approach is based on the method in which all the revenues or income circulating in economy like wages, interest rate, rent and profits are accumulated. The Product Approach counts the value of all final goods that is produced in the economy. This is done so to avoid the double counting of the product value. The Expenditure approach counts all private and public expenditures which were conducted in an Economy. In other words it is all the money spent by the Government for the benefit of the People.
GDP is affected by every determinant and variable in the economy. The effectiveness could be low or high it depending on the variable. For example if we were to say that education is one of the factors that affects the GDP so the effectiveness must be very high because it effect in multiple ways like it increases the human capital, it increase the technological levels, it helps to reduce crime in society etc.
GDP is usually low in developing countries and high in the developed countries. The level of GDP is a matter of concern for the Economy; although the stability of Economy can be found out by observing variation in GDP. One of the reasons of success of developed countries is also their consistency in terms of GDP levels. However one cannot ignore the fact that there are many factors behind the consistency of GDP.
The design of research is always extracted from literature review section. There is a strong relationship between literature review and research methodology or research design. For designing research for GDP first researchers need to collect and read all the related articles; from where researchers can find out about the factors which are effecting the GDP. The process of reviewing literature is to collect all the bibliography of articles on GDP then start reviewing it one by one. After review of article the researcher should write in literature review about the hypothesis questions which he has identified from the review portion of literature. The data used in articles, methodology applied, findings of the research posting of recommendations and conclusions. These are the important findings of any research article.
From reviewing the article it is extracted that GDP is mainly depend on investment, human capital and on interest rate. The data which we use is secondary data and we tend to find out how the GDP of developing countries is affected by investments, human capital and education. We use the data of these variables on several previous years to identify or predict the trend of the GDP of the existing year. Hence from review of literature we find that in research design we use the methodology of panel or pool regression because the data is panel in nature. Panel data means the data is based on more than one year (number of periods) and observing more than one country (cross sectional unit).
There are basically two types of data primary data and secondary data. The primary data are used mostly for qualitative methods and secondary data are used mostly for quantitative data. Primary data are the data which is firsthand experience like data collected from surveys by researcher as far as secondary data which is often found in forms of a published data. Our study is quantitative study and based on secondary data because we use published data from authentic source such as government publications.
The procedure of data collection is divided in several parts. Firstly researcher does planning and finalizes the general topic in which researcher has command and deep knowledge, then the researcher finds all the relevant article for that topic and also collect different literature from websites, books, manuals and other resources. After reviewing all these material a concept is developed in the mind of researcher that what variable researcher will use and which cross sectional countries the researcher will select and run the tests on and of course for how many years does he intend to run tests on. i.e. for instance In order to find out the GDP of UK for 2016, the researcher may run tests on from a period of 2010 to 2015 to predict the GDP trends and forecast the outlook of GDP in UK.
In the relevant study we find from many resources that investments, human capital and interest rate are the key factors which effect GDP of developing countries. The data we will use for developing countries and for the year 2000 to 2014. The data is available on world development bank. We can extract data from world development indicators. All of the data is available on WDI quite easily. The articles which researcher has studied are used for referencing purposes and given in detail in bibliography section of the Research Project.
Strengths and Weaknesses
Documentary research, is characterized by the use of documents; collects, selects, analyzes and presents consistent results; because it uses the logical and mental processes of any investigation; analysis, synthesis, deduction, induction, etc., because it performs a process of scientific abstraction, generalization based on the fundamentals; because it is an appropriate data collection that allow rediscover facts suggest problems, orient to other research sources, direct ways to develop research tools and develop scenarios.
At the same time, it can be considered as a fundamental part of a much broader process of scientific research, and finishing; it is a research carried out in an orderly and targeted, in order to be based on the construction of knowledge, and based on the use of different techniques: location and setting data, analysis of documents and content.
In turn, the bibliographic research allows, among other things, support research to be performed, avoid undertaking investigations already carried out, take cognizance of experiments and made to repeat when necessary, continuing interrupted or incomplete investigations, search for suggestive information, select materials for a theoretical framework, among other purposes.
In every study there are some ethics of research which the researcher should keep in mind. These ethics are essential components while doing the research. There is a component of relevance which means that the study that researcher is doing it should be related to the literature review and relate to the references and bibliography that have been used in the study.
Another component of ethics is completeness which describe that the sources should be complete in the sense that whole study have to be referenced and the study should give complete picture so that it is find interesting by reader.
Another component is current approach it means the study should meet the current approaches of subject it should not be old or far behind of today’s modern research in that subject. It should also highlight the recent and latest development in the study.
Our study meets all the ethical components efficiently because we give the references o related studies and our research is a complete package and also it is up to date research because the issue persists in several developing countries.
Conclusion is the last part of study which not only concludes research but also give recommendations to the problem that has been discussed in the study. GDP is the base of any economy and the indicators which researcher pick for testing their effectiveness to GDP are investment, human capital and interest rate. Researcher observes that all these 3 variables are significant but investment and human capital effect GDP in positive way as far as interest rate is concerned it affects the GDP in a negative way because when interest rate increase people tend to save more and decrease their investment.
- Landefeld, Steven J., Eugene P. Seskin, and Barbara M. Fraumeni. “Taking the pulse of the economy: Measuring GDP.”The Journal of Economic Perspectives22, no. 2 (2008): 193-193.
- Demirgüç-Kunt, Asli, and Enrica Detragiache.The determinants of banking crises-evidence from developing and developed countries. Vol. 106. World Bank Publications, 1997.
- Janesick, Valerie J. “The dance of qualitative research design: Metaphor, methodolatry, and meaning.” (1994).
- Tanzi, Vito, and Hamid Davoodi.Corruption, public investment, and growth. Springer Japan, 1998.
- Creswell, John W.Qualitative inquiry and research design: Choosing among five approaches. Sage, 2012.
- Punch, Keith F.Introduction to social research: Quantitative and qualitative approaches. Sage, 2013.
- Bryman, Alan.Social research methods. Oxford university press, 2012.
- Guillemin, Marilys, and Lynn Gillam. “Ethics, reflexivity, and “ethically important moments” in research.”Qualitative inquiry10, no. 2 (2004): 261-280.
 Landefeld, Steven J., Eugene P. Seskin, and Barbara M. Fraumeni. “Taking the pulse of the economy: Measuring GDP.”The Journal of Economic Perspectives22, no. 2 (2008): 193-193.
 Demirgüç-Kunt, Asli, and Enrica Detragiache.The determinants of banking crises-evidence from developing and developed countries. Vol. 106. World Bank Publications, 1997.
 Janesick, Valerie J. “The dance of qualitative research design: Metaphor, methodolatry, and meaning.” (1994).
 Tanzi, Vito, and Hamid Davoodi.Corruption, public investment, and growth. Springer Japan, 1998.
 Creswell, John W.Qualitative inquiry and research design: Choosing among five approaches. Sage, 2012.
 Punch, Keith F.Introduction to social research: Quantitative and qualitative approaches. Sage, 2013.
 Bryman, Alan.Social research methods. Oxford university press, 2012.
 Guillemin, Marilys, and Lynn Gillam. “Ethics, reflexivity, and “ethically important moments” in research.”Qualitative inquiry10, no. 2 (2004): 261-280.
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