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Analysis of GDP using the n-variable Regression Model
Article in International Journal of Management Technology and Social Sciences · May 2021
DOI: 10.47992/IJMTS.2581.6012.0138
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International Journal of Management, Technology, and Social SRINIVAS
Sciences (IJMTS), ISSN: 2581-6012, Vol. 6, No. 1, May 2021 PUBLICATION
Analysis of GDP using the n-variable
Regression Model
Krishna Kumar Chaudhary,* & Anjay Kumar Mishara**
*Ph.D. Scholar, OPJS University, Churu, Rajasthan, India and Assistant Professor, Madan
Bhandari Memorial Academy Nepal, Urlabari 3, Morang, Nepal.
**Post Doctoral Research Scholar, Srinivas University, India and Associate Professor,
Madan Bhandari Memorial Academy Nepal, Urlabari3, Morang, Nepal
OrcidID: 0000-0003-2803-4918; Email: anjaymishra2000@gmail.com
Area/Section: Business Management.
Type of the Paper: Analytical Policy Research.
Type of Review: Peer Reviewed as per |C|O|P|E| guidance.
Indexed in: OpenAIR E.
DOI: https://doi.org/10.5281/zenodo.4772970
Google Scholar Citation: IJMTS
How to Cite this Paper:
Chaudhary, Krishna Kumar, & Mishra, Anjay Kumar, (2021). Analysis of GDP using the
n-variable Regression Model. International Journal of Management, Technology, and
Social Sciences (IJMTS), 6(1), 170-175. DOI: https://doi.org/10.5281/zenodo.4772970.
International Journal of Management, Technology, and Social Sciences (IJMTS)
A Refereed International Journal of Srinivas University, India.
CrossRef DOI: https://doi.org/10.47992/IJMTS.2581.6012.0138
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Krishna Kumar Chaudhary, et al, (2021); www.srinivaspublication.com PAGE 170
International Journal of Management, Technology, and Social SRINIVAS
Sciences (IJMTS), ISSN: 2581-6012, Vol. 6, No. 1, May 2021 PUBLICATION
Analysis of GDP using the n-variable Regression Model
Krishna Kumar Chaudhary,* & Anjay Kumar Mishara**
*Ph.D. Scholar, OPJS University, Churu, Rajasthan, India and Assistant Professor, Madan
Bhandari Memorial Academy Nepal, Urlabari 3, Morang, Nepal.
**Post Doctoral Research Scholar, Srinivas University, India and Associate Professor,
Madan Bhandari Memorial Academy Nepal, Urlabari3, Morang, Nepal
OrcidID: 0000-0003-2803-4918; Email: anjaymishra2000@gmail.com
ABSTRACT
Purpose: Gross Domestic Product(GDP) depends on Agriculture, Service, and industry
performance. The main aim of the study is to assess the relationship between dependent
variable GDP and Independent variables agriculture, industry, and service sector by using the
n-variable Regression Model at initial condition.
Design/Methodology/Approach: The study is an application of the n-variable Regression
Model at the initial condition to analyze the situation of GDP along with reasons not becoming
zero GDP even after using the initial condition. The secondary data of the GDP of Nepal from
the Central Bureau of Statistics of 10 years till 2019/20 has been analyzed. By finding cofactors
of correlation coefficient matrix, Mean and standard deviation of the individual data to
establish the linear relationship between dependent and independent variable.
Findings/Result: Under initial conditions, if all the independent variables zero, the GDP is
−751028.431 billion, negative sign shows that GDP decreases highly if the entire major factor
has no role in GDP. It is non-zero GDP. It means in the 11th year the stated amount will be
expended from the previous year saving for forex to import which will not be possible in a
sustainable economy. It will not be possible in real conditions however it may be hypothetical
possible either because of the impact of informal economy or disinvestment or negative net
exports. It is significant for forecasting the future GDP of a country effectively assuming
different conditions for policy formulation.
Originality/Value: It is the first empirical research using the n-variable Regression Model for
GDP Analysis.
Paper Type: Analytical Policy Research
Keywords: GDP negative, Dependency, n-variable Regression Model, initial conditions, forex
1. INTRODUCTION :
The Bureau of Economic Analysis (BEA) gives a clear definition for GDP: ‘Gross domestic product
(GDP) is the value of the goods and services produced by the nation’s economy less the value of the
goods and services used up in production. GDP is also equal to the sum of personal consumption
expenditures, gross private domestic investment, and net exports of goods and services, and government
consumption expenditures and gross investment [1]. Total GDP may be separated into the commitment
of every industry or area of the economy. The proportion of GDP to the absolute populace of the
particular political boundary is the per capita GDP and the equivalent is called Mean Standard of Living
which depends largely on Agriculture as it is main source of income for most of people in Nepal. Most
of people in compression to any other sector are employed in agriculture in Nepal. In 2019, a little more
than 50% of Nepal's total national output comes from service area. Farming contributed the second
biggest sum, while 13% came from the business area. Most of the Nepalese populace lives in country
territories, and are relied upon farming for their business (O'Neill, 2021) [2].
Around 63% of Nepal's 29.6 million occupants are essential for the labor force, for example between
15 to 64 years of age. Despite the fact that the nation has an exceptionally low joblessness rate (likely
because of the way that agrarian occupations are normally not considered while ascertaining public
joblessness), it is viewed as a nation burdened by high neediness, with a predictable import/export
imbalance and an unpredictable expansion rate. Nonetheless, late impressions of youngsters’
expectations for everyday comforts when they experience childhood in Nepal are overwhelmingly of
Krishna Kumar Chaudhary, et al, (2021); www.srinivaspublication.com PAGE 171
International Journal of Management, Technology, and Social SRINIVAS
Sciences (IJMTS), ISSN: 2581-6012, Vol. 6, No. 1, May 2021 PUBLICATION
the assessment that the way of life is better. Movements of foreign aid in Nepal is significant for GDP
and need to reform internal sources for the sustainable development of Nepal (Mishra and Aithal, 2021)
[3].
Nepal has vigorous binds with the nation of India, which is both the country's primary fare accomplice,
just as its principle import accomplice. Nepal's economy has been affected by political precariousness
throughout the span of the nation's set of experiences: a government until the mid-2000s, it at that point
turned into a republic with a Maoist-overwhelmed government. Recently, Nepal made a few endeavours
to advance its financial circumstance, yet depends vigorously on settlements and unfamiliar guide
(Mishra and Aithal, 2021) [4]. Even a recent study by Chaudhary and Mishra (2021) [5] on Impact of
Agriculture on Economic Development of Nepal using Statistical Model shows that agriculture has a
significant positive impact on economic development of Nepal and agriculture is the back bone for an
economy without which the economy neither can be functioned nor can be survived.
Chaudhary and Mishra (2021) [6] has Development of n-variable Regression Model which is a highly
applicable technique to show the predictor and estimator can predict and estimate the impact of
dependent variable on independent variables. The process of finding the mathematical function which
describe the relationship between a dependent variable and one or more independent variable in
regression analysis.
2. RATIONAL OF THE RESEARCH :
Most of the article is in descriptive cum survey, researcher will go through quantitatively and analyse
the highly significant data (GDP and agriculture, agriculture and Industry, Industry and Service sector,
Service sector and GDP) and establish the linear relationship between all the factors and find out the
situation of GDP after using initial conditions. No any research using of n-variable Regression Model
has been done as it’s a newly developed model. So, the researcher intended to conduct the research as
empirical validity of their own developed model.
3. OBJECTIVES :
The main aim of study is to assess the relationship between dependent variable GDP and Independent
variables agriculture, industry and service sector by using n-variable Regression Model at initial
condition what is the situation of GDP and why GDP not became zero even after using initial condition.
4. RESEARCH METHODOLOGY :
The linear relationship between four factors will be
𝐴11 𝐴 𝐴 𝐴
𝜎
𝑥1 + 𝜎12 𝑥2 + 𝜎13 𝑥3 + 𝜎14 𝑥4 = 0 (*)
1 2 3 4
Where𝐴11 ,𝐴12 ,𝐴13 and 𝐴14 are cofactor of correlation coefficient matrix, 𝜎1 ,𝜎2 ,𝜎3 and 𝜎4 are
standard deviation of the individual data and 𝑥𝑖 = 𝑋𝑖 − 𝜇𝑖 . Here researcher find cofactors of
correlation coefficient matrix, Mean and standard deviation of the individual data and show up the
linear relationship between dependent and independent variables (Chaudhary and Mishra, 2021) [6].
Source of Data:
The bureau of statistics and ministry of finance will be main source of data to interpret and analyse and
minor source are book, article, magazine etc.
5. RESULTS AND DISCUSSION :
Linear Relationship between Agriculture, Industry, Services and GDP
The association that we have in method and methodology is used to interpret and analyse the data taken
from source of bureau of statistics is as given in table 1.
Table 1 : Sectorial Contribution to GDP
FY Real GDP(X1) Rs. Agriculture (X2) Industry (X3) Services (X4)
in Billion Rs. in Billion Rs. in Billion Rs. in Billion
2009/10 565.76 205.52 91.29 293.27
2010/11 587.53 214.79 95.25 303.32
2011/12 614.64 224.73 98.11 318.52
2012/13 637.77 227.19 100.73 336.76
2013/14 674.23 237.52 107.84 357.69
Krishna Kumar Chaudhary, et al, (2021); www.srinivaspublication.com PAGE 172
International Journal of Management, Technology, and Social SRINIVAS
Sciences (IJMTS), ISSN: 2581-6012, Vol. 6, No. 1, May 2021 PUBLICATION
2014/15 694.27 240.14 109.40 374.26
2015/16 695.69 240.68 102.44 383.06
2016/17 749.55 253.20 115.14 414.04
2017/18 797.15 260.33 126.16 444.06
2018/19 850.93 273.51 135.90 476.27
2019/20 870.25 280.59 140.29 485.76
Total 𝑋1 = 7737.77 X2=2658.20 𝑋3 = 1222.55 𝑋4 = 4187.01
Source: Central Bureau of Statistics, 2020 [7]
Under calculation
∑𝑋 7737.77
Mean (𝜇1 ) = 1 = = 703.4336
𝑁 11
The Population standard deviation 𝜎 is applicable where entire population can be known along with sq.
root of variance. In probabilistic condition, the standard deviation of the entire population can be found
by
1
𝜎 = √𝑁 ∑𝑁
𝑖=1(𝑥𝑖 − 𝜇)
2
Where xi is an individual value
𝜇 is the mean/ expected value
N is the total number of values
Under calculation,
1
Standard deviation (𝜎1 ) = √11 ∑11
𝑖=1(𝑥𝑖 − 𝜇)
2
(565.76−703.4336)2 +⋯.………………+(870.25−703.4336)2
=√ 11
=98.1987
Similarly, one can compute mean and standard deviation for agriculture, industry and services
Mean (𝜇2 ) = 241.6545 Standard deviation (𝜎2 ) = 22.4746
Mean (𝜇3 ) = 111.1409 Standard deviation (𝜎3 ) = 15.721009
Mean (𝜇4 ) = 380.6373 Standard deviation (𝜎4 ) = 64.1748
A Pearson’s correlation coefficient (r) whose value of r lies between -1 to 1 inclusively. Formula we
have
𝑛(∑ 𝑥𝑦−(∑ 𝑥)(∑ 𝑦)
r= 2 2 2 2
√[𝑛 ∑ 𝑥 −(∑ 𝑥) ][𝑛 ∑ 𝑦 −(∑ 𝑦) ]
Using the formula for computation one can find all the association values,
𝑟11 = 1 𝑟12 = 0.9952 𝑟13 = 0.9835 𝑟14 = 0.9986
𝑟21 = 0.9952 𝑟22 = 1 𝑟23 = 0.9753 𝑟24 = 0.9833
𝑟31 = 0.9835 𝑟32 = 0.9753 𝑟33 = 1 𝑟34 = 0.9743
𝑟41 = 0.9986 𝑟42 = 0.9833 𝑟43 = 0.9743 𝑟44 = 1
Let us put these value in matrix form say that matrix as correlation coefficient matrix: is as
1 0.9952 0.9835 0.9986
0.9952 1 0.9753 0.9833
𝐴=[ ]
0.9835 0.9753 1 0.9743
0.9986 0.9833 0.9743 1
Then the cofactor of the matrix will
1 0.9753 0.9833 691134007
𝐴11 = (−1)1+1 |0.9753 1 0.9743| = = 0.001382
500000000000
0.9833 0.9743 1
Krishna Kumar Chaudhary, et al, (2021); www.srinivaspublication.com PAGE 173
International Journal of Management, Technology, and Social SRINIVAS
Sciences (IJMTS), ISSN: 2581-6012, Vol. 6, No. 1, May 2021 PUBLICATION
0.9952 0.9753 0.9833 491200011
𝐴12 = (−1)1+2 |0.9835 1 0.9743| = − = −0.0004912
1000000000000
0.9986 0.9743 1
0.9952 1 0.9833 120594087
𝐴13 = (−1)1+3 |0.9835 0.9753 0.9743| = − = −0.0001206
1000000000000
0.9986 0.9833 1
0.9952 1 0.9753 779841049
𝐴14 = (−1)1+4 |0.9835 0.9753 1 |=− = −0.00077984
1000000000000
0.9986 0.9833 0.9743
Substituting cofactor of correlation coefficient matrix, standard deviation and 𝑥𝑖 = 𝑋𝑖 − 𝜇𝑖 in (*) one
can get
0.001382 −0.0004912 −0.0001206
(𝑋 − 703.4336) + (𝑋2 − 241.6545) + (𝑋3 − 111.1409)
98.1987 1 22.4746 15.721009
−0.00077984
+ (𝑋4 − 380.6373) = 0
64.1748
or,
691 439646 307 483309 603 1111409
(𝑋1 − )− (𝑋2 − )− (𝑋3 − )
49099350 625 14046625 2000 78605045 10000
2437 3806373
− (𝑋4 − )=0
200546250 10000
This is required linear relationship between dependent variable GDP and independent variables
agriculture, industry and service.
Under initial conditions if all the independent variable zero we found that GDP is −751028.431 billion,
negative sign shows that GDP decreases highly if the entire major factor has no role in GDP. It implies
that the year in which all factors of production is zero but previously we have saving that will be reduced
with amount of negative sign. It is technically possible only when GDP will be considered as sum of
private consumption, plus government spending, plus investment and plus net exports which is experts
minus imports. So, may in a case investment and net expert will be negative causing the GDP to be
negative which will not be sustainable economy. That is why GDP cannot be negative, only growth
rate could be negative. In time series of 10 years, GDP with negative sign while we consider all factors
agriculture, industry and service as zero shows in 11th year we loss the751028.431 billion USD from
the saving. It is only hypothetically possible because in the current economic system a country needs
forex to import everything and any country with absolute zero production is not going to get forex while
sitting on its butt. The reason for GDP not becoming zero may be because of missing informal sector
contribution or continuity of consumption from previous saving as shrinking of GDP growth. In a real
condition, GDP never becomes zero or negative even if people in the country does not work and
provided all expenses including medical facilities by government. This could be done by printing tons
of tons of local currency but it will come to an end as this currency will come to zero in comparison to
other country exchange rate after consuming their reserves. Resulted into zero import still GDP will not
be negative however if population is there in a geography definitely, they do some production and GDP
will not be Zero. GDP per capita doesn't, be that as it may, reflect contrasts in the average cost for
basic items and the swelling paces of the nations; accordingly, utilizing a premise of GDP for every
capita at buying power equality is apparently more helpful when looking at expectations for everyday
comforts between countries, while GDP is more valuable looking at public economies on the worldwide
market.
6. RECOMMENDATIONS :
GDP is a significant national economic analysis technique. So, further study is to be conducted for
conforming the other factors significance in contribution of GDP. Factorial Analysis for all factor which
might affect GDP should be conducted in a way to prioritize all factor based on its importance. The n-
variable Regression Model should be applied to explain all national accounting indicator such Gross
National Income, Net National Product, National Income, Personal Income and Disposable Personal
Income.
7. CONCLUSION :
Krishna Kumar Chaudhary, et al, (2021); www.srinivaspublication.com PAGE 174
International Journal of Management, Technology, and Social SRINIVAS
Sciences (IJMTS), ISSN: 2581-6012, Vol. 6, No. 1, May 2021 PUBLICATION
GDP can be only hypothetically negative but it could not be even zero or negative in real condition as
GDP as country needs forex to import which will not be available for zero production country. But
hypothetically, in a country has negative net exports and it is not covered by consumption or investment
then GDP can be negative. Illustrate if private consumption was 40 and government consumption was
10 with zero investment and exports was 20 and imports 100, then GDP= 40+10+0+20-100= -30.
Maybe it can happen if a country imports lots of arms and armament but does not consume anything
else. The negative GDP in n-variable Regression Model at initial conditions reflect the stated amount
will be consumed from saving of previous year for operation of economic at zero production which is
only hypothetical.
8. ACKNOWLEDGEMENTS :
The authors wish to thank Madan Bhandari Memorial Academy Nepal Students for their significant
works out during calculation using different methods to validate the findings as their assignment.
REFERENCES :
[1] Bureau of Economic Analysis. (2015). Measuring the Economy: A Primer on GDP and the National
Income and Product Accounts. Available at: www.bea.gov/newsreleases/
national/gdp/gdpnewsrelease.htm.
[2] Aaron O'Neill, Mar 31, 2021 https://www.statista.com/statistics/425750/nepal-gdp-distribution-
across-economic-sectors/
[3] Mishra, A. K., & Aithal, P. S., (2021). Foreign Aid Movements in Nepal. International Journal of
Management, Technology, and Social Sciences (IJMTS), 6(1), 142-161. DOI:
https://doi.org/10.5281/zenodo.4677825.
[4] Mishra A. K., & Aithal P. S., (2021). Foreign Aid Contribution for the Development of Nepal.
International Journal of Management, Technology, and Social Sciences (IJMTS), 6(1), 162-169.
DOI: https://doi.org/10.5281/zenodo.4708643.
[5] Chaudhary K. K., Mishra A. K. (2021). Impact of Agriculture on Economic Development of Nepal
using Statistical Model. J. Adv Res Alt Energ Env Eco, 8(2): 1-3. DOI:
https://doi.org/10.24321/2455.3093.202101.
[6] Chaudhary K. K., Mishra A. K. (2021). Development of n-variable Regression Model. J. Adv. Res.
Appl. Math. Stat., 6(1&2): 1-3. DOI: https://doi.org/10.24321/2455.7021.202101.
[7] Central Bureau of Statistics, 2020, www.cbs.gov.np assessed on 15 May 2021.
*********
Krishna Kumar Chaudhary, et al, (2021); www.srinivaspublication.com PAGE 175
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