Analysis of Economic Indicators for 20 Countries - Case Study Example

Quantitative Analysis Name: Tutor: Course: Date: Table of contents 1.0 Introduction 4 1.1 Source of data 5 1.2 Objectives of the Research Study 5 2.0 Research Methodology 6 2.1 Analysis of data 6 2.2 Descriptive statistics 6 Table 1: Definition of descriptive statistics 7 Table 2: Descriptive Statistics 8 2.3 Test of normality of data 8 Table 3: Test of normality 9 2.4 Correlations 9 Table 4: Pearson correlations (a) 10 Table 5: Pearson correlations (b) 12 2.5 Regression 12 Table 6: Model Summaryb 13 Table 7: Coefficientsa 13 3.0 Limitations 14 4.0 Conclusion and recommendations 14 References 16 Appendices 17 Research Data from www.tradingeconomics.com 2015 17 List of tables 1.0 Introduction 4 1.1 Source of data 5 1.2 Objectives of the Research Study 5 2.0 Research Methodology 6 2.1 Analysis of data 6 2.2 Descriptive statistics 6 Table 1: Definition of descriptive statistics 7 Table 2: Descriptive Statistics 8 2.3 Test of normality of data 8 Table 3: Test of normality 9 2.4 Correlations 9 Table 4: Pearson correlations (a) 10 Table 5: Pearson correlations (b) 12 2.5 Regression 12 Table 6: Model Summaryb 13 Table 7: Coefficientsa 13 3.0 Limitations 14 4.0 Conclusion and recommendations 14 References 16 Appendices 17 Research Data from www.tradingeconomics.com 2015 17 Analysis of economic indicators for 20 countries during the period of year 2015 1.0 Introduction Economic growth in developed and developing countries has been a subject of debate over the last decade. With increasing levels of technology, ease of access to credit and improvement in capital inflows, most countries are experiencing positive economic growth. However, recessions and stagnation in employment opportunities have witnessed negative economic growth even in developed countries. Chand (2014) argues that for a country to develop economically, determinants such as foreign trade, capital formation, and natural resources, human resources and corruption must be taken into consideration. Naker (2013) agrees that high economic growth rates, especially in the 1980s, were driven by rising house prices and wages, low real interest rates and rise in consumer confidence. Although some countries have plenty of natural resources, they lack capabilities and human capital to transform them into the growth path. In these countries, unemployment remains high and so is the lending rates that are suppose to trigger investments and consumer spending. While unemployment rate may signal saturation of the job market with respect to skills and creative abilities, lack of disposable income among the youth adversely affects consumer spending (Bonilla, 2008). In reality, surplus labor has little significance on the growth of the economy meaning that human resources have to be adequate in terms of abilities and skills to achieve economic growth (Boyes & Melvin, 2015). Gross Domestic Product (GDP) growth rate is driven by personal consumption, business investment, exports and imports, and also government spending. However, a country experiencing low GDP growth rate is likely to halt hiring of new employees and investment in new purchases (Dwivedi, 2010). As a result, there will be rise in unemployment rate and difficulty to secure credit for investment opportunities. This study aims to discuss the relationship between the various economic indicators that affect economic growth of a country. For example, it would be interesting to find out how bank lending rates affect home ownership while remittances, unemployment rate and capital flow influence real GDP output of a country. The significance of this analysis is to help identify an economic path, especially for developing countries, if they are to undertake economic planning or follow a capitalist path of development. In the latter case, the state may assume the rational interventionist role in an efficient market system. As unemployment rate rises, people become a burden to the economy as manpower management remain defective (Mankiw, 2014). However, increased capital flows in the form of remittances and Foreign Direct Investments (FDIs) are likely to spark economic growth. In conclusion, economic growth of a country is determined by a number of factors which have been identified below. While bank lending rate, GDP growth rate, capital inflows and remittances affect the economy directly, government spending and unemployment rate are also non-economic indicators that influence economic growth. It would be of great interest to establish the relationship between bank lending rate, unemployment rate and government spending. 1.1 Source of data The aim of this study is to analyze the relationships of various economic indicators that affect economic growth of a country. Data from 20 countries were obtained from www.tradingeconomics.com which provides up-to-date information on economic indicators of various countries around the world. To obtain reliable and sufficient data, the following were undertaken; Consideration on key economic indicators such as Money, GDP, Prices, Labor, Government, and Trade Official statistics used reflect actual figures for the year ending December 2015 Countries from developing and developed world were included in the analysis Representative countries were selected from each continent Six variables were considered with 105 results obtained Data was sourced from trading economics website which is a very reliable source of economic information for analysts and consultants around the world. While providing accurate and real-time data, the website is reputable and highly trusted. 1.2 Objectives of the Research Study The objectives of this research study are; 1. To investigate the factors that influence economic growth of a country 2. To establish the relationship between bank lending rate, unemployment rate and GDP growth rate 3. To assess the impact of GDP growth rate on capital flows, government spending and remittances In order to evaluate the above objectives, SPSS software was use to code and analyze the data from the source earlier mentioned. The statistical interpretations are then made following the data presented in form of tables. 2.0 Research Methodology This research study has one independent variable and five dependent variables. In the conceptual framework, independent variable (IV) is a determining variable that influences a number of other variables called dependent variables (DV) (Torres-Reyna, 2013). In this quantitative study, the independent variable is GDP growth rate while dependent variables include Capital Flows, Bank Lending Rate, Remittances (R), Government Spending and Unemployment Rate. Capital flows is the movement of money for research and development, business production, trade or investment within corporations Bank lending rate is the interest rate at which financial institutions lend to clients or loanees Consumer price index (CPI) describes the changes in market basket price levels for services and goods consumed by households Unemployment depicts the people outside the workforce with specific skills and abilities but cannot access jobs Government spending is the investment, consumption and transfer payments done by the government 2.1 Analysis of data Several measures and tools are used to analyze the economic data to provide meaningful associations and descriptions. Some of the tools used are; Descriptive statistics Spearman correlation measures Regression equations 2.2 Descriptive statistics Descriptive statistics is a collection of measurements of variability, distribution and location. While location informs of the central value of the variable, variability explains the spread of data from the central value (Vogt, 2007). Measures used to measure location are mean, mode and median while variability is measured by range, standard deviation and variance (Torres-Reyna, 2013). Descriptive statistics is best summarized in the table below. Table 1: Definition of descriptive statistics Measurement Group Statistic Formula Definition Location Mean Commonly used indicators as it is the sum of observations when divided by total number of observations Median The number in the middle for odd number of cases and average of two numbers if number of cases are even Mode The number that is common, repetitive or frequent in the data Variability Variance Simple mean of square distance and measures dispersion of data from the mean Standard deviation Squared root of variance that shows the closeness of data to the mean Distribution Skewness Shows if the mean is the centre of the distribution or not (symmetry of distribution). Negative value shows a skew to the left while positive value shows a skew to the right (Torres-Reyna, 2013) Kurtosis Measures the flatness or peakedness of distribution. Value of 3 is a normal distribution while kurtosis>3 has heavy tails with sharp peak closer to the mean. A kurtosis Read More