Multiple Regression Analysis of the Impact of some Selected Macro - Economic Variables on the Gross Domestic Product (GDP)

Abstract

The economy of many nations is dwindling with the recent happenings in the globe. This development has made macro-economic variables unpredictable and volatile. Understanding the
interrelationships between GDP and key macroeconomic variables is pivotal for navigating economic challenges, fostering sustainable growth, and enhancing overall economic stability. This
study employs multiple linear regression analysis to investigate the relationship between Gross
Domestic Product (GDP) as the dependent variable and four prominent macroeconomic indicators namely, inflation rate, interest rate, exchange rate, and the all- share index as independent
variables. Utilizing a robust dataset spanning historical records of GDP and corresponding data
on inflation rates, interest rates, exchange rates, and stock market performance, this research
evaluated the quantitative impact and significance of these variables on GDP. The model obtained is GDP = 22.995˘0.265INF + 2.452INT + 0.75EX −0.323ASI.. The analysis revealed
compelling results that indicate a statistically significant relationship between GDP and the
selected macroeconomic factors. The findings suggested that inflation rate, interest rate, and
exchange rate exhibit varying degrees of influence on GDP, with inflation rate demonstrating a
moderately negative impact, while interest rate and exchange rate display positive associations
with GDP fluctuations. It is recommended that policymakers should consider adopting measures to manage inflationary pressures while utilizing interest rate and exchange rate policies
strategically to stimulate economic growth.