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Denmark Investment

Extracts from this document...

Introduction

Akram H. Choudhury

A914861

The relationship between the growth rate of investment expenditures and GDP for Denmark 1967-2009

Econometrics (2nd Year)

Professor Paul Turner

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Gross domestic product (GDP) refers to the market value of all final goods and services produced within a country over a given period of time. One of the ways it can be measured is by the expenditure approach: GDP = private consumption (C) + gross investment (I) + government spending (G) + exports (X) – imports (M). This immediately illustrates that investment, defined as an increase in capital stock (gross fixed capital formation), affects the level of GDP, all else held constant. Conversely, businesses tend to invest if they predict growth in GDP and hence potential profits. This positive relationship is confirmed by the positive coefficients of the variables and both growth rates tend to have matching signs.

Performing a regression enables us to find numerical values for theoretical parameters. The default method for estimating the parameters of an equation is ‘least squares’.

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Middle

2 as a proxy. Since its value of 0.12 is far less than the 5% significance level even at 30 degrees of freedom, we can assume there is no heteroscedasticity. However, this form of testing lacks power because of its generality.

Denmark (February 2011). Annual IFS series

Series

Real GDP Growth Rate (%)

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Conclusion

c0">0.030515768

-2.410813596

1988

1.214478801

-5.703896172

1989

0.150326556

0.297795212

1990

0.123052114

-4.75956312

1991

1.300419616

-3.214607508

1992

1.975493837

-3.498505634

1993

-0.089663111

-4.182658096

1994

5.525432573

7.339850098

1995

3.064793277

10.12448547

1996

2.835155871

3.955632123

1997

3.198276549

8.84966935

1998

2.160789369

6.56752816

1999

2.802033515

0.413545803

2000

3.284708783

5.089447415

2001

0.705246632

-1.334746272

2002

0.585049946

-0.29569091

2003

0.441182558

-1.232693253

2004

2.382123327

2.579392611

2005

2.310739455

3.524965547

2006

3.366837732

14.6694091

2007

2.524877378

2.931867098

2008

-0.718841895

-4.855046932

2009

-5.260049052

-17.33583118

Page  of


[1] Chris Dougherty, Introduction to Econometrics (Page 227), Third Edition, Oxford University Press

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