statistic final project - Data Project Requirements 120...

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FINAL DATA PROJECT Spring 2010 – Newport Beach Campus Southern States University By Nurdan Ozturk To Claudia Araiza, Ph.D. 1
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A study of Investment (capital formation) in US and its’ dependence on GDP, GDP per capita, inflation and Gross debts of the economy I. Introduction: Business involves taking many decisions, some long term some short term. Mostly business decisions are made on the basis of forecasting and studying data characteristics. In this report I intend to study the business decision of investment in US economy, this will be done on the basis of study made on the investment or capital formation trends in the US. It will be analyzed if capital formation depends on GDP level, GDP per capita level, inflation or gross debts. This will enable a businessman to understand what should be his move amidst various economic conditions in the country. The macro investment information of the whole economy enables the businessmen to understand the flow of investment at micro level. Thus a decision maker can take a broader view before investing in US economy, and get an idea how business decision regarding capital formation will depend on other macro economic indicators. Many studies have been conducted for forecasting the trend of dependent variables like FDI, income, growth of an economy on the basis of other independent variables. Following is a study of these researches. In addition to this I have also studied the success of regression as a tool of forecasting from various researches conducted in the past. Hall (2009), made a study to find the determinants that lead to increase in FDI and exports and after conducting study on cross section as well as panel data of 22 countries from OPEC w.e.f. 1991-2001. He concluded that a change in market size affects both the dependent variables positively according to panel data analysis. Another point he raised was that stock markets affected FDI positively. Chien-Chiang and Sheng-Tung (2007), studied relationship between GDP and defence expenditures using data from 27 oECD and 62 non OECD countries for 1988-2003. They reached the conclusion on applying regression analysis that there exists strong positive relationship between GDP and ME: military expenditure for OECD countries where as negative relationship was found to exist between both variables for non OECD countries. Ghosh and Berg (2006), conducted 2
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a research to find if FDI stimulated growth of economy. The US was selected as the country under study and the finding were positive and stated that there was significant, positive, and economically significant impact of FDI on US economic growth. They also found FDI to be income elastic. Bairam (1991), made a study of impact of government expenditure and money supply on the unemployment situation of US economy. He used regression analysis to find the impact of fiscal and monetary policy and stated that both had significant impact. Carr (1989), in his study tried to find out whether government expenditure retards or accelerates economic growth in an economy. He made an
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