I need to build a model that analyses the impact of several factors (including tax rate, interest rate, unemployment rate, FDI, etc.) on GDP growth in Russia between 1999 and 2019. The model needs to...

THE IMPACT OF SEVERAL FACTORS ON GROSS DOMESTIC PRODUCT RATE (GDP) IN RUSSIA

Table of Contents
Abstract    3
Introduction    4
Impact of Control Variables on GDP Growth    4
Impact of Tax Rate    4
Impact of Unemployment    4
Impact of FDI    4
Methodology    5
Data origin and manipulation    5
Descriptive statistics    5
OLS Regressions    6
Time Series    7
Construction of Auto Regressive Integrated Moving Averages for the time series data    7
References    11
Abstract
This research makes use of quarterly data to identify the impact of several factors on Gross Domestic Product rate in Russia with respect to tax rate, interest rate, unemployment rate, FDI, etc in Russia. The model was built to include both the impact and control variables based on quarterly data. The Regression equations are built to know the impact of the control variables on the GDP. The results in regression equation explain that inflation rate shows lesser impact on the country’s growth rate. We need to build the time series model, in order to know the dependency between an observation and residual errors from a moving average applied to lag observations. The model, which possesses the lowest lag, is the best ARIMA model. Lag indicates the fixed period in the time series.
Introduction
Gross Domestic Product is an economic indicator, which shows the financial position of a nation. It measures the total value of economic activities that take place within a country. It can also be defined as the benefit of the market values, or prices of all finished goods and services produced in an economy during a particular period, it is a number that expresses the worth of the output of a country in terms of its local currency. Not all kinds of productive activity are included. For example, unpaid work that are performed in the home or by volunteers and black-market activities are excluded because they are difficult to measure and not valued accurately.
Impact of Control Variables on GDP Growth
Impact of Tax Rate
“The taxation system in Russia is not very transparent, its predictable and stable taxation system, has widely been considered as one of the main reasons for the economic woes that Russia experienced during the 1990s, after the country entered the trembling path of democracy and market economy. But after the tax reform was remarked as a new beginning from 2000 the taxation system and went up being one of the biggest hindrances for investments and economic growth”.
Impact of Unemployment
Russia can be easily compared to one of the most developed countries in terms of its unemployment rate. During the period of December 2018 to February 2019, the official statistics regarding the unemployment rate was about 4.9%. This sounds quite competitive in international standards. For instance, the average Euro-Zone unemployment rate was 7.9%.
Impact of FDI
Foreign direct investment constitutes a highly important part of contemporary world economy, namely Globalization of international decade. However, the success or failure of FDI within the country is largely attributed to the success or failure of the transition process and vice versa, which means that FDI is obviously interrelated with other economic indicators.
Methodology
Data origin and manipulation
The data originates from the Russian Gross Domestic Product and it consists of 80 observations with 20 years data from 1999 to 2018 each divided into four quarters, added that the data includes relevant characteristics which are used in the model. This paper uses the data to identify the impact of several factors on Gross Domestic Product rate in Russia with respect to tax rate, interest rate, unemployment rate, FDI and many more.
Descriptive statistics
This presents the descriptive statistics and it should be read along with the below Stat-table. The below results, show the impact that the different variables create on growth rate of GDP. From the below table, we can say that imply from the standard deviation whether data is widely spread or clustered around mean. Here Inflation rate has highest standard deviation, which means the data points are widely spread and far away from mean. Unemployment rate on the other hand has lower standard deviation, which tells us that data is rotating mostly around mean and is more reliable.
The above table explains the correlation of GDP Growth rate with the impact and control variables. The partial Correlation measures the strength of relationship between two variables, whilst controlling the effect of one or more variables.
OLS Regressions
After a clear examination, we observe that Unemployment rate is regarded as an important factor, which influences the GDP growth rate. This is due to the lower the rate of unemployment more people can have work and more days per annum, which directly contributes the country’s GDP rate. The Inflation rate on other half has low impact on GDP. We can go through the below tables and draw a conclusion regarding the impact of impact...