The reason for choosing the topic
Gross Domestic Product (GDP) serves as a fundamental indicator of a country's economic growth, scale, development level per capita, economic structure, and price level transformation It is widely utilized globally to assess national economic changes and development A thorough understanding and strategic application of GDP are crucial for evaluating sustainable and comprehensive economic progress Countries strive for economic growth alongside monetary stability and job creation, making GDP a vital signal of governmental efforts Analyzing GDP growth trends and the factors influencing it enables governments to adjust policies aimed at fostering economic development This macroeconomic focus is essential for professionals in the field, which is why our group chose to investigate "Some Factors Affecting GDP in Vietnam from 1995 to 2011."
Objectives of the study
Investigate the influence of three factors: Investment, Export, Import, on GDP in the period 1995-2011
Scope of the study
Total investment, total export, total import and total GDP of Vietnam from 1995 to2011.
Structure of the study
1 “Factors affecting GDP of Ho Chi Minh City”
The study examined the impact of various factors on the GDP of Ho Chi Minh City, focusing on human resources, investment, exports, and imports The findings revealed that only the total investment value has a direct influence on the city's GDP, while human resources, exports, and imports do not significantly affect it.
From the verified result demonstrated that the regression model was appropriate for economic theory, the explanatory variables were 99.52% of the fluctuation to GDP of Ho Chi Minh City.
2 “ The influence of total value of export and import, population, CPI, inflation rate on GDP during 1990-2009”
The research analyzed key factors such as export, import, population, Consumer Price Index (CPI), and inflation rate from 1990 to 2009, revealing their significant influence on GDP Notably, exports, imports, and population collectively accounted for 99.8184% of the volatility in GDP during this period.
3 “Analyzing the impact of FDI, export, import, population on GDP”
This research highlights the significant impact of foreign direct investment (FDI), exports, imports, and population on GDP, with population growth being a major contributor However, relying solely on population growth to boost GDP can lead to adverse effects and negatively affect long-term sustainability The study concludes that prioritizing exports over population growth is essential for achieving sustainable development.
4 “Relationship between Export and GDP”
Research indicates that light industrial and handicraft exports significantly influence GDP With a 95% confidence level, it is observed that a $1 billion increase in exports from the light and small-scale industries leads to an average GDP rise from 24,614 to 90,032 hundred billion VND, assuming other factors remain unchanged.
Research suggests that fluctuations in the export value of agricultural and fishery products do not significantly impact GDP Therefore, even if we maintain other economic factors constant and increase exports in these sectors, it will not lead to economic growth.
5 “ Analyzing the influence of FDI on GDP”
Between 1995 and 2010, foreign direct investment (FDI) significantly influenced GDP, demonstrating a 95% reliability rate To further enhance GDP growth, the study recommends expanding the investment market, liberalizing the commodity market, simplifying administrative procedures, and easing monetary and fiscal policies Additionally, it suggests providing incentives for investments in high-value industries and ensuring a balanced allocation of investment capital across various sectors and regions.
However, in the articles which has already studied, there has not been any research on the problem that our group are doing below.
Every country, regardless of its political stance, has a unique strategy for socio-economic development, with economic growth being a primary objective This growth serves as a key indicator of a nation's progress over time In Vietnam, economic development is viewed as a critical responsibility, as sustained and stable growth leads to significant achievements and improved living standards for its citizens Consequently, economic development remains a central topic in economic research, with economists often using gross domestic product (GDP) as a benchmark to assess a country's economic performance.
Definition
Gross Domestic Product (GDP) represents the total monetary value of all finished goods and services produced within a country's borders during a specific time frame While GDP is typically calculated annually, it can also be assessed quarterly, with the U.S government providing annualized GDP estimates for each quarter as well as for the entire year.
Gross Domestic Product (GDP) encompasses all private and public consumption, government expenditures, investments, private inventories, construction costs, and the balance of trade, where exports are added and imports subtracted Essentially, GDP serves as a comprehensive indicator of a nation's economic activity, distinguishing itself from Gross National Product (GNP), which focuses on the production of a nation's citizens, including those abroad, while excluding foreign production within the country The significance of GDP extends to businesses, which utilize it as a benchmark for determining production strategies, and to investors, who monitor GDP as a critical factor in their investment decisions.
The "inventory" data in the GDP report serves as a valuable resource for equity investors, reflecting overall growth during the period Additionally, corporate profits data reveals pre-tax profits, operating cash flows, and detailed breakdowns across all major economic sectors.
Exports play a crucial role in international trade, involving the shipment of goods from one country to another for sale or trade This process not only facilitates commerce between nations but also contributes significantly to the gross output of the exporting country.
Exports, a fundamental aspect of economic exchange, play a crucial role in enhancing the growth of economies, particularly in nations with minimal trade restrictions like tariffs and subsidies Major corporations in advanced economies significantly rely on international exports for a large share of their annual revenues Additionally, promoting economic trade is a key objective of diplomacy and foreign policy, aimed at benefiting all involved trading partners.
Exports play a vital role in enhancing a country's economy by driving international trade and boosting domestic activities, leading to job creation and increased revenue Companies engage in exporting to tap into new markets, which can significantly elevate sales and profits while diversifying business risk across various regions Additionally, expanding operations internationally can lower per-unit costs due to heightened demand, and exporting provides valuable insights into new technologies and foreign market dynamics However, companies face challenges such as increased costs associated with market research and product adaptation, along with heightened financial risks due to complex payment collection processes that differ from domestic transactions.
An import is a good or service brought into one country from another The word
The term "import" originates from "port," reflecting the common practice of shipping goods by boat to other countries Imports, alongside exports, are essential components of international trade When a country's imports surpass its exports in value, it results in a negative balance of trade.
Countries typically import goods when their domestic industries are unable to produce them as efficiently or cost-effectively as exporting nations Additionally, nations may seek to import raw materials or commodities that are not available locally A prime example is the importation of oil, as many countries lack the capacity to produce it in sufficient quantities to satisfy demand Factors such as free trade agreements and tariff schedules significantly influence the cost-effectiveness of importing various goods and materials.
The United States' primary trading partners are China, Canada, and Mexico, with Canada and Mexico being part of the North American Free Trade Agreement (NAFTA) established in 1994 This agreement facilitated the creation of one of the world's largest free-trade zones, enabling the seamless flow of goods and materials among the three nations with minimal restrictions.
NAFTA has significantly impacted the automotive industry by decreasing manufacturing in the United States and Canada, while Mexico has emerged as the primary beneficiary of the agreement The lower labor costs in Mexico compared to the U.S and Canada have incentivized automakers to shift their production facilities south of the border.
An investment refers to an asset or item obtained with the intention of generating income or increasing in value over time Economically, it involves acquiring goods that are not immediately consumed but are utilized in the future to build wealth In the realm of finance, investments are monetary assets bought with the expectation of yielding future income or being sold later at a profit.
The term "investment" can refer to any mechanism used for generating future income.
In the financial sense, this includes the purchase of bonds, stocks or real estate property.
A constructed building or facility for goods production represents a valuable investment, as it not only serves its primary purpose but also contributes to the creation of additional goods, reinforcing the concept of investment in the production process.
Investing in future revenue often involves taking actions that enhance skills and knowledge, such as pursuing further education This strategic decision aims to ultimately boost income potential and improve overall career prospects.
The origin of model from theory
1 Calculation method according to expenditure
This method is calculated by adding up the spending:
- Consumer spending (C): Includes all expenditures for products and services produced and sold by enterprises to households.
- Investment expenditure (I): Total investment capital for social development in the period Investment capital for social development includes:
• Capital construction investment includes construction capital, capital for procurement of equipment, other capital construction, livestock for plowing, breeding
To enhance mobile assets, it is crucial to boost capital during periods of inventory growth, particularly at the year's end and beginning This includes increasing raw materials, materials, finished products, and goods in circulation, as well as products generated by agricultural and non-agricultural households and those held in state reserves.
Government spending on goods and services encompasses expenditures by both central and local authorities, covering essential areas such as defense, administration, healthcare, education, and the maintenance of public order Additionally, it includes investments in public works and infrastructure development, highlighting the critical role of government in supporting societal needs and fostering economic growth.
- Net export (NX) is the difference between export and import of the economy.
The expenditure method of calculating GDP reflects a country's economic relationship with foreign nations, as it accounts for spending at market prices This approach ensures that GDP is measured based on the actual market value of goods and services consumed.
2 Calculation method according to income
In a straightforward economic framework, GDP is determined by summing all the income distributed by the enterprise sector to households, which includes wages, interest, rent, and profits.
GDP = Y = Salary + interest + rent + profit.
The calculation of GDP by income, often referred to as factor price GDP, reflects the payments made by enterprises for production resources In a government-free economy, GDP calculated at market prices and factor prices yields identical results However, the presence of a government necessitates adjustments to the income-based GDP to align it with the GDP calculated at market prices.
The initial adjustment involves incorporating indirect taxes into income The government generates revenue through indirect taxes, which are imposed on goods and services in the market, including government subsidies for production that are classified as indirect taxes.
The second adjustment in GDP calculations involves incorporating depreciation alongside earnings This is essential because, when GDP is calculated at market price, depreciation is factored into investment expenditure, whereas the income approach does not account for depreciation.
Therefore, the formula for calculating GDP when there is a government:
GDP = Total income = Salary + Interest + Rent + Profit + indirect tax + depreciation.
3.Calculation method according to added value
The value-added method is the sum of all the added value of the economy in a period.
Gross domestic product = Added value + import tax
Or GDP = Production value - intermediate cost + import tax
The overall economic value of a country and its regions is defined by the total value added across various economic sectors This comprehensive assessment highlights the contribution of each sector to the national economy, emphasizing their collective impact on economic growth and development.
- Added value of each economic sector including:
• Producers' incomes such as salaries and wages (including cash or in kind and paychecks), deductions for social insurance, health insurance, superior union payments, income other than salary, wages.
• Production taxes include: Goods tax (excluding import taxes) production taxes and other costs Production tax does not include direct taxes such as income tax, corporate income tax
The added value of an enterprise is defined as the difference between its output value and the cost of material inputs acquired from other businesses This metric highlights the enterprise's contribution to economic value, showcasing its efficiency and innovation in transforming raw materials into finished products Understanding added value is crucial for assessing a company's performance and competitiveness in the market.
The theory put variables into model
Dr Nguyen Van Cong defines GDP as the total market value of all final goods and services produced within a specific timeframe The growth of GDP is influenced by several key factors that play a crucial role in its overall performance.
First, human resources Some people view that as the core of economic growth.
People who have health, intellect, qualification, enthusiasm, motivation will be the basic factor of economic growth.
Second, investment In order to produce goods, buy machinery and equipment, expand production scale, improve skills for employees, we need capital investment.
Harod Domar stated the relationship between investment and economic growth with the ICOR formula, which is the rate of investment increase divided by the rate of GDP growth.
Countries rich in natural resources enjoy significant advantages for economic development, as these resources can be effectively harnessed for production and exported to acquire essential goods.
Intellectual technology plays a crucial role in driving significant economic growth by leveraging advancements in science and technology These innovations enhance productivity and production efficiency, leading to a remarkable surge in output.
Net exports play a crucial role in our open economy, reflecting our trade and financial relationships with other countries By exporting competitively priced goods and services while importing items with cost advantages, we create a balance that influences economic growth The difference between exports and imports, known as net exports, directly contributes to the production of more goods and services, ultimately driving economic expansion.
Statistical Description
We summarize the data in the following table:
From the graph, we can see:
Minimum value is 228677 billion VND.
Maximum value is 2415204 billion VND.
Average value is 853482.8 billion VND/year.
Minimum value is 72447 billion VND.
Maximum value is 877850 billion VND.
Average value is 346008.35 billion VND/year.
Minimum value is 5448.9 billion VND.
Maximum value is 96905.7 billion VND.
Average value is 32082.5 billion VND/year.
Minimum value is 8155.4 billion VND.
Maximum value is 106750 billion VND.
Average value is 38213.3 billion VND/year.
Correlation Description
Before going deeper into the econometric model, we’ll have a look at the correlation between variables.
Correlation coefficients, using the observations 1995 - 2011 5% critical value (two-tailed) = 0.4821 for n = 17
The result gives us some information:
+ The correlation level between GDP and In is 98.70%
+ The correlation level between GDP and Ex is 99.38%
+ The correlation level between GDP and Im is 98.43%.
Buiding multiple regression model
The model consists of 4 variables:
+ Dependent variable: Gross Domestic Product (GDP) (billion VND/year) + Independent variables:
Investment: In (billion VND/year)
Export: Ex (billion VND/year)
Import: Im (billion VND/year) Sample regression model:
Running multiple regression model
We run the regression model by Gretl and the table below is the result:
Coefficient Std Error t-ratio p-value const 80485.3 20022.8 4.020 0.0015 ***
Mean dependent var 853482.8 S.D dependent var 636263.3 Sum squared resid 3.04e+10 S.E of regression 48368.33
Schwarz criterion 421.7607 Hannan-Quinn 418.7591 rho 0.575681 Durbin-Watson 0.835498
From the above result, we have the regression model as follows:
Regression model analysis
+ Number of observations: 17 + R-squared = 0.995305 => Investment, export, import explain about 99.5305% of the variation of GDP.
β1= 80485.3 means: the total value of investment, export and import equal 0 at the same time, the average of GDP is 80485,3 billion VND/year.
β2= 1.14732 means: Export, Import constant, total investment increase (decrease) 1 billion VND/year, GDP increase (decrease) 1,14732 billion VND/year.
β3= 31.0314 means: total investment, import constant and if export increase (decrease) 1 billion vnd/year, GDP increase (decrease) 31,0314 billion VND/year.
β4 = −16.2129 means: total investment, export constant import increase(decrease) 1 billion VND/year, GDP decrease (increase) 16,2129 billionVND/year.
1 Testing individual regression coefficient (P-value method)
By P- value method, we can test the influence of each independent variable, which includesIn, Ex, Imon the value of dependent variableGDP.
→ Conclusion: the regression coefficients of variables In, Ex, Im are statistically influenced on GDP.
In another way, from OLS table, we also have result:
The F-test yields a P-value of 2.23e-15, which is significantly lower than the alpha level of 0.05 Consequently, we reject the null hypothesis (H0) and accept the alternative hypothesis (H1), indicating that the slope coefficients of the independent variables are not all equal to zero In conclusion, this confirms that our regression model is statistically significant and well-fitted.
II.Checking for multicollinearity, normality and heteroskedasticity
Multicollinearity, also known as collinearity, occurs when one predictor variable in a regression model can be accurately predicted from other predictors This leads to instability in the coefficient estimates of multiple regression, causing them to fluctuate significantly with minor changes in the model or data.
There are certain reasons why multicollinearity occurs:
It is caused by an inaccurate use of dummy variables.
It is caused by the inclusion of a variable which is computed from other variables in the data set.
Multicollinearity can also result from the repetition of the same kind of variable.
Generally occurs when the variables are highly correlated to each other.
Use other source of information
Delete one or more variables
Transform the variables: taking log, ratio,…
In Gretl, the correlation matrix serves as a tool for detecting multicollinearity A correlation coefficient exceeding 0.8 between two variables indicates the presence of multicollinearity in the regression model.
We get the following result:
Correlation coefficients, using the observations 1995 - 2011 5% critical value (two-tailed) = 0.4821 for n = 17
From the above results demonstrates:
The correlation coefficient between In and Ex is 0.9844 > 0.8
The correlation coefficient betweem In and Im is 0.9873 > 0.8
The correlation coefficient between Ex and Im is 0.9948 > 0.8
→ The model occurs multicollinearity phenomenon.
Regression model after removing variable “In”:
Coefficient Std Error t-ratio p-value const 105714 27485.0 3.846 0.0018 ***
Mean dependent var 853482.8 S.D dependent var 636263.3 Sum squared resid 6.84e+10 S.E of regression 69899.43
F(2, 14) 655.8519 P-value(F) 1.46e-14 Log-likelihood −212.1034 Akaike criterion 430.2069
Schwarz criterion 432.7065 Hannan-Quinn 430.4554 rho 0.354849 Durbin-Watson 1.286398
=>R2reject In= 0.989440 b.Remove variable “Ex”:
Regression model after removing variable “Ex”:
Coefficient Std Error t-ratio p-value const 58315.0 41176.6 1.416 0.1786
Mean dependent var 853482.8 S.D dependent var 636263.3 Sum squared resid 1.42e+11 S.E of regression 100770.6
Schwarz criterion 445.1434 Hannan-Quinn 442.8922 rho 0.639165 Durbin-Watson 0.855499
=>R2reject Ex= 0.978052 c.Remove variable “Im”:
Regression model after removing variable “Im”:
Coefficient Std Error t-ratio p-value const 77945.0 28042.8 2.779 0.0148 **
Mean dependent var 853482.8 S.D dependent var 636263.3 Sum squared resid 6.43e+10 S.E of regression 67779.82
Schwarz criterion 431.6596 Hannan-Quinn 429.4084 rho 0.647029 Durbin-Watson 0.755837
=>R2reject Im = 0.990070 Comparing 3 regression models, we can see that R2reject Ex < R2reject In< R2reject Im. Therefore, we can remove the variable “Im” out of the model.
Heteroskedasticity: Recall that OLS makes the assumption that Vj(ε) = σ2 for all j.
That is, the variance of the error term is constant (Homoskedasticity) If the error terms do not have constant variance, they are said to be heteroskedastic.
We have the pair of hypothesis as below:
Using White’s test for heteroskedasticty in Gretl, we get the result as below:
White's test for heteroskedasticity OLS, using observations 1995-2011 (T = 17) Dependent variable: uhat^2 coefficient std error t-ratio p-value - const −2.41057e+09 3.45944e+09 −0.6968 0.5084
Test statistic: TR^2 = 12.134290, with p-value = P(Chi-square(9) > 12.134290) = 0.205844
The analysis reveals that the TR^2 value is 12.134290, accompanied by a p-value of 0.205844, which exceeds the 0.05 threshold Consequently, we accept the null hypothesis (H0) indicating that the residuals are homoscedastic This suggests that the regression model for GDP, based on imports, exports, and income, does not exhibit heteroscedasticity.
According to the Basic assumptions of OLS (Gaus-Makov), we have the 5th assumption: u ~ N(0,σ2).
+If this assumption does not hold, then estimates are still unbiased, but we will not be able to assess which parameters are significant
+ The normality of the estimates is not hold+ The significant tests will not follow the t-student distribution
+ The joint significant test will not follow an F distribution Pair of hypothesis:
H1: u doesn’t follow normal distribution Using Normality of Residual in Gretl, we get the result:
Frequency distribution for uhat1, obs 1-17 number of bins = 7, mean = 1.64351e-010, sd = 48368.3 interval midpt frequency rel cum.
Test for null hypothesis of normal distribution:
Chi-square(2) = 4.257 with p-value 0.11902 p-value 0.11902 > 0.05 => not reject H0=> u follows normal distribution.
Finding
- The total value of investment, export and receipt of capital affects the gross domestic product of Vietnam in the period of 1995-2011.
- The model is selected in accordance with economic theory.
- Investment, export and import explain 99.5305% of the fluctuation of GDP, while 0.4695% are unknown factors, not included in the model.
- The original model has multicollinearity phenomenon and it is an incomplete multicollinearity phenomenon, overcome by eliminating “Im” variables from the model.
- The model has no heteroskedasticity phenomenon.
- Can remove import variables from the model in case of necessity.
Discussion
- To increase GDP in a country, it is necessary to strengthen the implementation of policies to attract investment capital, increase exports and limit imports.
- Focus on attracting multinational corporations to invest in large projects, high technology, infrastructure, create a change in the structure, promote industry support and create conditions for domestic businesses to develop.
- Increasing productivity and reducing imports.
At the state level, there is a stable political and social environment, strong international relations, and an efficient legal framework The fast-operating governmental apparatus and reasonable political mechanisms contribute to a favorable economic climate, where bank interest rates and exchange rates effectively promote imports while simultaneously curbing exports.
Enhancing competitiveness at the enterprise level involves boosting production and business efficiency To achieve this, companies must offer competitive goods and services characterized by low costs, high quality, appealing design, suitable packaging, and alignment with consumer preferences, ensuring widespread market reach.
The above report is completed on the basis of the contributions of the members with the knowledge capital drawn from the process of studying and studying econometrics.
This article highlights the importance of practicing analysis and verification to deepen our understanding of socio-economic phenomena By applying knowledge gained in lectures, we aim to draw valuable conclusions about the correlations and interplay between various factors Our team has successfully followed the prescribed methodology for conducting both quantitative and qualitative studies, focusing on the impact of investment, export, and import on GDP We have developed a comprehensive econometric model to analyze these factors influencing GDP.
Investment, export, import have a significant influence on GDP.
It is possible to add some more variables to increase relevance of the model, however, the model will be more complicated, with more defects, causing difficulties in testing.
Due to the limited capacity of each group member, the topic inevitably has its shortcomings We eagerly welcome feedback from teachers and peers to enhance our understanding and improve our knowledge effectively.
2 https://text.123doc.org/document/1945283-kinh-te-luong-nhung-yeu-to-anh-huong-de n-gdp-cua-tphcm.htm
3 https://text.123doc.org/document/4115652-phan-tich-su-anh-huong-cua-fdi-xuat-nhap
-khau-va-dan-so-den-gdp.htm
Nghiên cứu về mô hình kinh tế lượng nhằm phân tích tác động của tổng giá trị xuất nhập khẩu, dân số, chỉ số giá tiêu dùng (CPI) và tỷ lệ lạm phát đến tổng sản phẩm quốc nội (GDP) là rất quan trọng Mô hình này không chỉ giúp hiểu rõ hơn về mối quan hệ giữa các yếu tố kinh tế mà còn cung cấp thông tin hữu ích cho việc hoạch định chính sách Việc áp dụng các phương pháp phân tích hiện đại sẽ nâng cao độ chính xác trong dự đoán và đánh giá các biến động kinh tế.
5 https://text.123doc.org/document/4115652-phan-tich-su-anh-huong-cua-fdi-xuat-nhap
-khau-va-dan-so-den-gdp.htm
6 https://text.123doc.org/document/3493126-mqh-giua-xuat-khau-va-gdp.htm
7 https://www.gso.gov.vn/
8 https://tailieu.vn/doc/luan-van-nghien-cuu-su-anh-huong-cua-von-dau-tu-nuoc-ngoai- fdi-toi-tong-thu-nhap-trong-nuoc-gdp 1542765.html