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The GDP is one of the primary indicators used to gauge health of country’s economy. In short it represents dollar value of all goods and services produced over a specific time period generally one year.

GDP depends on a myriad number of factors and the purpose of our regression analysis is to study the variables that affect the GDP of nations. We have boiled down to a specific few variables which have major impact on GDP according to us. The variables and their effects have been covered in detail ahead.

Reasons behind choosing the independent variables

Our main independent variables are Literacy Rate, Economic Freedom Rating, Government Spending as percentage of GDP and Current Account Balance. Here is a brief rationale behind the choice.

• Literacy Rate: Literacy rate is a direct indicator of the human resource capability of the country and is positively correlated with the productivity of the country’s labor force. GDP per capita is directly proportional to productivity of the labor force. Thus we considered literacy as a strong influencer of GDP per capita.

• Economic Freedom Rating: The Index of Economic Freedom is a series of 10 economic measurements created by The Heritage Foundation and The Wall Street Journal. Its stated objective is to measure the degree of economic freedom in the world's nations. Empirical studies based on these rankings have found higher living standards, economic growth, income equality, less corruption and less political violence to be correlated with free markets, all of which correspond to positive GDP per capita.

• Government spending as percentage of GDP: Government spending indicates the level of infrastructural developmental and welfare activities undertaken by the respective governments across the world. This serves as a building block of the overall economic growth of the country, which is

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...This page intentionally left blank Introductory Econometrics for Finance SECOND EDITION This best-selling textbook addresses the need for an introduction to econometrics speciﬁcally written for ﬁnance students. It includes examples and case studies which ﬁnance students will recognise and relate to. This new edition builds on the successful data- and problem-driven approach of the ﬁrst edition, giving students the skills to estimate and interpret models while developing an intuitive grasp of underlying theoretical concepts. Key features: ● Thoroughly revised and updated, including two new chapters on ● ● ● ● ● ● panel data and limited dependent variable models Problem-solving approach assumes no prior knowledge of econometrics emphasising intuition rather than formulae, giving students the skills and conﬁdence to estimate and interpret models Detailed examples and case studies from ﬁnance show students how techniques are applied in real research Sample instructions and output from the popular computer package EViews enable students to implement models themselves and understand how to interpret results Gives advice on planning and executing a project in empirical ﬁnance, preparing students for using econometrics in practice Covers important modern topics such as time-series forecasting, volatility modelling, switching models and simulation methods Thoroughly class-tested in leading ﬁnance schools Chris Brooks is Professor of Finance...

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...A Guide to Modern Econometrics 2nd edition Marno Verbeek Erasmus University Rotterdam A Guide to Modern Econometrics A Guide to Modern Econometrics 2nd edition Marno Verbeek Erasmus University Rotterdam Copyright 2004 John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester, West Sussex PO19 8SQ, England Telephone (+44) 1243 779777 Email (for orders and customer service enquiries): cs-books@wiley.co.uk Visit our Home Page on www.wileyeurope.com or www.wiley.com All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except under the terms of the Copyright, Designs and Patents Act 1988 or under the terms of a licence issued by the Copyright Licensing Agency Ltd, 90 Tottenham Court Road, London W1T 4LP, UK, without the permission in writing of the Publisher. Requests to the Publisher should be addressed to the Permissions Department, John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester, West Sussex PO19 8SQ, England, or emailed to permreq@wiley.co.uk, or faxed to (+44) 1243 770620. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold on the understanding that the Publisher is not engaged in rendering professional services. If professional advice or other expert assistance is required,...

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