Quantitative

research
methodology
project
Marin Adrian Cosmin,
Applied Modern Languages,
948

Quantitative research
analysis for economic indicators
Introduction
In conducting my analysis, I chose a set of 4 variables for 30 respondents, in my case
for 30 countries from all around the globe. The purpose of my research is to see how exactly
one economic phenomenon is influencing another. The 3 of the 4 indicators are economic
related, meaning that they measure the economic situation of a country, the 4th one being
the population growth of those countries, in order to see how the increase in population
may influence the economic activity, but I will discuss in the following section more about
the correlation between the indicators. All the data was provided by the World Bank Group,
data files which are available on the World bank website, www.worldbank.org.

1. Describing the indicators

The first indicator that I analysed is the GDP growth as a percentage. The metadata
for this indicator is as follows: Annual percentage growth rate of GDP at market prices
based on constant local currency. Aggregates are based on constant 2005 U.S. dollars. GDP is
the sum of gross value added by all resident producers in the economy plus any product
taxes and minus any subsidies not included in the value of the products. It is calculated
without making deductions for depreciation of fabricated assets or for depletion and
degradation of natural resources. Basically, this is the main method of analysing the
economic growth of a country and it is closely watched by everyone, from the governmental
entities such Central Banks, to all the financial analysts that are interested in a particular
country. Due to the fact, that it tracks all the goods and services produced in a country, it
might be also measure of the productivity in the national borders. The GDP has 3 methods
based on which it is calculated: consumption method, income method and value added
method, so you have to be careful how you interpret the data. As the metadata of the
indicator that I analysed told us, this GDP growth was calculated through the value added
method.
As I said earlier the GDP growth is driven by the population of the country, so I looked
into the actual growth of that population. A higher population number means that there are
more people who can produce at a some point goods and services that can increase the
economic growth of that country. So, the metadata of the indicator that I used is the
following one: Annual population growth rate for year t is the exponential rate of growth of
midyear population from year t-1 to t, expressed as a percentage . Population is based on
the de facto definition of population, which counts all residents regardless of legal status or
citizenship--except for refugees not permanently settled in the country of asylum, who are
generally considered part of the population of the country of origin. As we can see, in the
population measurement there are counted all the people within the borders of a country,
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as they have maintain a standard of living and engage in economic activities.The World Bank
Group gathered the data from: (1) United Nations Population Division. World Population
Prospects, (2) United Nations Statistical Division. Population and Vital Statistics Report
(various years), (3) Census reports and other statistical.
After analysing the population of the country, I have looked into the household
consumption as a percentage of the GDP to see exactly how much is the private sector
spends on goods and services. The metadata of this indicator as stated by the World Bank is
as follows: Household final consumption expenditure (formerly private consumption) is the
market value of all goods and services, including durable products (such as cars, washing
machines, and home computers), purchased by households. It excludes purchases of
dwellings but includes imputed rent for owner-occupied dwellings. It also includes payments
and fees to governments to obtain permits and licenses. Here, household consumption
expenditure includes the expenditures of nonprofit institutions serving households, even
when reported separately by the country. This item also includes any statistical discrepancy
in the use of resources relative to the supply of resources. As you can see, the private
sector consumption is one of the best ways to see how prosperous a country is. It can give
you an insight also on the standards of living for a specific country, which is pretty much
related to the economic growth.
The last indicator which I used to conduct my research is the inflation. It is generally
known that a countrys most desired level of inflation is 2%, as it is considered the right level
at which an economy grows properly. The metadata of this indicator as stated by the World
Bank is as follows: Inflation as measured by the consumer price index(CPI) reflects the
annual percentage change in the cost to the average consumer of acquiring a basket of
goods and services that may be fixed or changed at specified intervals, such as yearly. The
Laspeyres formula is generally used. Low inflation encourages consumers to buy goods and
services, which leads to economic growth. Delaying will mean that they would have to pay
more for the same product. Low inflation also makes it more appealing to borrow money so
that the entrepreneurs could engage in different projects, since interest rates are usually
also low during periods of low inflation. High inflation can cause the populations confidence
in their own currency and economy to decline, and it can be less appealing for foreign
investors to invest in the country concerned. High inflation therefore often has a harmful
effect on economic growth. For this indicator data, the World Bank Group used data from
International Monetary Fund, International Financial Statistics and data files.

2. Describing the data

So far, we have analysed only the indicator, what they measure, how are they related
to each other. Lets move now to analysing the data that I have gathered. In the beginnning I
would like to mention that all this data represents the data for 2012 in this countries, as I
could find the data for all the countries. Data of more recent period had not been completed
for every country.
In the first instance, I have sorted the data from the lowest to the highest in terms of

GDP growth as a percentage. By this indicator, the country with the lowest growth, or better
said with a decrease, is Italy, -2.81%, so the economy of this country was actually sinking in
2012. Closely after Italy, it was Spain with a -2.62%. So, there are actually two countries with
a decrease in the GDP with more than 2.50%, which is a very bad sign, the economy was
practically in a recession. On the other side, the country with the biggest increase in the GDP
is China, +7.75%, which was prospering compared to the other countries, now China has a
GDP growth around 6.9% and it is expected to decrease. After China, we had United Arab
Emirates and Philippines with a growth of 6.89%, respectively 6.68%. As a little conclusion,
the European countries had a very bad economic situation, while the Asian countries were a
lot above the others.
Here, in the Figure 1., we can see exactly where is each country situated in terms of
its GDP growth. There are 5 countries which had a decrease in their GDP for the year 2012.
This could represent a very big problem for the people living there as their economy is
sinking, affecting in the end every economic sector.
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Figure 1. GDP growth (annual %)

7
5
3
1
-1

Italy
Spain
Finland
Luxembourg
Sweden
Belgium
France
Ukraine
Germany
Romania
Austria
Argentina
Switzerland
United Kingdom
Poland
Japan
Brazil
Canada
Turkey
New Zealand
South Africa
United States
Norway
Russian Federation
Singapore
Australia
India
Philippines
United Arab Emirates
China

-3

GDP
growth
(annual %)

After analysing the graphic for the GDP growth, I have sorted in the same manner the
data from the lowest to the highest the level of private consumption for the chosen
countries. As you can see in the figure 2, most of the countries have the household
consumption as a percentae of the GDP between 50%-60%.

Luxembourg is the country with the lowest percentage in the household consumption, after
which China is situated almost at the same level as Singapore. These countries have an
economy in which the private consumption is not thatwell developed. It might be a bad sign
at a certain point when you find out that the consumption sector is driven mostly by the
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public sector, represented by the Government, thing that might affect the people confidence
in the political class. On the other side we have Philippines, Turkey and the United States,
countries that have around 70% from consumption made by the private sector. This could be
interpreted as a good information, but it might be also problematic as the economy is not
producing too much, just consuming.

Figure 2. Household consumption (% of GDP)

80
70
60
50
40

Household
consumption
expenditure(% of
GDP)

30
20

Luxembourg
China
Singapore
Norway
United Arab
Sweden
Russian
Belgium
Austria
Australia
Switzerland
Finland
Canada
France
Germany
New Zealand
Spain
India
Japan
South Africa
Brazil
Poland
Italy
Romania
United
Argentina
Ukraine
United States
Turkey
Philippines

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I have analysized further the population growth of those countries. In the figure 3 we
have the ranking of this data.
There are some countries which actually encountered in 2012 a decrease in their
population. The number of such countries is five. Germany leads this chart with a negative
growth, almost -1.5%. The reasons for population decrease might be very various. The
population might be aging and dying or they might just leave the country, but given the fact
that we are discussing here about the biggest economy in the Europe, I think that the first
reason is more appropriate. At a certain point, there would be a very low percentage of
people in the working class that have to sustain the economy.
We have 3 countries which have a population growth of almost 2.5% and those are
United Arab Emirates, Singapore and Luxemboug. In this countries, there are more and more
people. Analysing from the point of view of the economy, this means that the standards of
living are very good in those countries and the economic activities are working properly,
reason why people are more confident that their children could be in a good place to grow.

Figure 3. Population growth (annual %)

2
1
0
-1

Population
growth
(annual %)
Germany
Romania
Ukraine
Japan
Poland
Spain
Russian Federation
Italy
France
Austria
Finland
China
New Zealand
United Kingdom
Belgium
Sweden
United States
Brazil
Argentina
Switzerland
Canada
Turkey
India
Norway
South Africa
Philippines
Australia
Luxembourg
Singapore
United Arab Emirates

-2

In the Figure 4. I have analysed the inflation from the countries as measure by the
Consumer Price Index. The country with the lowest inflation is Switzerland, country with a
negative inflation of -0.66%, the same country which has for a few years a negative
benchmark interest rate, which is thought to stimulate the economic activities. Along with
Switzerland, Japan faced a negative inflation of -0.03% in that year, too. Right now, Japan
followed the same monetary policy as Switzerland, fact which makes us take into
consideration more seriously the inlation level. On the ther side, we have Argentina with an
inflation level around 10%, followed by India and Turkey around 9%. This high level of
inflation, again, is not regarded as a good sign, meaning that the population can purchase
fewer and fewer goods and services, which in the long run have a very bad influence on the
overall economy.

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Figure 4. Inflation, consumer prices (annual %)

9
7

3. Grouping the data

The nest step in conducting my research was to group the data into classes. I took
each indicator and I grouped the data by different ranges, showing them in histograms.
5
3
Inflation,
consumer
prices

Switzerland
Japan
Ukraine
United Arab Emirates
Norway
New Zealand
Sweden
Canada
Australia
France
Germany
United States
Spain
Austria
China
Luxembourg
Finland
United Kingdom
Belgium
Italy
Philippines
Romania
Poland
Singapore
Russian Federation
Brazil
South Africa
Turkey
India
Argentina

-1

The Figure 5. Here we have the histogram for the indicator related to the GDP
growth(annual %).

Figure 5. GDP growth(annual %)

12

10
8
6
4
2
0
(-3%)-(-1%)

(-1%)-1%

1%-3%

3%-5%

5%-7%

7%-9%

As you can see, I grouped the data into 6 intervals, with a interval width of 2%. From
this histogram we can see very well that 20 out of 30 countries have a GDP growth ranged
between -1% to 3%. In these two intervals, we have 9, respectively 11 countries. From this
histogram we can conclude that there is a positively skewed distribution.
The next histogram is regarded the household consumption, Figure 6.

Figure 6. Household consumption

16
14
12
10
8
6
4
2
0
32%-42%

42%-52%

52%-62%

62%-72%

72%-82%

Based on this indicator, I have grouped the data into 5 intervals with a width of 10%.
15 out of 30 countries, meaning 50%, have a private consumption as a percentage of the
GDP between 52% and 62%. So, those countries find themselves in the middle compared to
the others.
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In the Figure 7. I have drawn a histogram for the population grwoth as a percentage.

Figure 7. Population growth %

8
7
6
5
4
3
2
1
0
(-2%)-(-1,5%)

(-0,5%)-0%

0%-0,5%

0,5%-1%

1%-1,5%

1,5%-2%

2%-2,5%

Based on the data that I have gathered in the first place, I have grouped it into 7
intervals with a width of 0.5%, as the results of my research provided to be included
between -2% and 2.5%. The interval where is situated a large number of countries is 0%0.5%, meaning 7 countries. Closely after this interval, as we can see from this figure, there
are two intervals with the same number of countries, still having a positively skewed
distribution.
In the next histogram, Figure 8, I have grouped the data that I found for the inflation.

Figure 8. Inflation
12
10
8

6
4
2
0
<-0,6%

(-0,6%)-0,9% 0,9%-2,4% 2,4%-3,9% 3,9%-5,4% 5,4%-6,9% 8,4%-9,9% 9,9%-11,4%

Again, there is a positively skewed histogram, with a big percentage of countries with
a inflation between 2.4% and 3.9%. So, most of the countries are situated in the right side of
the histogram.
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4. Descriptive statistics
In the next section, I have summarized the data using descriptive statistics for each
indicator. I would like firstly to explain each component of this descriptive statistics:
the mean is the average of the data, which is the sum of all the observations
divided by the number of observations.
The median is the midpoint of the data set. This midpoint value is the point at
which half the observations are above the value and half the observations are
below the value. The median is determined by ranking the observations and
finding the observation that are at the number [N + 1] / 2 in the ranked order. If
the number of observations are even, then the median is the average value of the
observations that are ranked at numbers N / 2 and [N / 2] + 1.
The mode is the value that occurs most frequently in a set of observations.
Minitab also displays how many data points equal the mode.
The range is the difference between the largest and smallest data values in the
sample. The range represents the interval that contains all the data values.
The standard deviation is the most common measure of dispersion, or how
spread out the data are about the mean. The symbol (sigma) is often used to
represent the standard deviation of a population, while s is used to represent the
standard deviation of a sample. Variation that is random or natural to a process is
often referred to as noise.
The variance measures how spread out the data are about their mean. The
variance is equal to the standard deviation squared.
Skewness is the extent to which the data are not symmetrical.
Kurtosis is used to initially understand general characteristics about the
distribution of your data.
The sum is the total of all the data values.
In this figure 9. We have all the statistics for the GDP growth.
GDP growth (annual %) Figure 9.
Mean
Standard Error
Median
Mode
Standard Deviation
Sample Variance
Kurtosis
Skewness
Range
Minimum
Maximum
Sum
Count

1.768514452
0.458519756
1.657701542
#N/A
2.511416134
6.307210998
0.619754611
0.610550319
10.56823619
-2.817938597
7.750297593
53.05543357
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The mean of the this indicator is 1.76, meaning that this is the average growth in the
GDP for this 30 particular countries for which I have analysed the data. We can conclude also
that half of the countries have a GDP growth below 1.65% and half of them have a GDP
growth above this number of 1.65%. Giving the fact that there is no identical data in the data
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set, meaning no country has the same values as another one, we have no mode. Moving
forward, we can conclude also that the standard deviation 2.51% meaning that the GDP
growth deviates on average by 2.51% from the mean. In this case we have a positive
kurtosis meaning that the value indicates that the distribution has heavier tails and a sharper
peak than the normal distribution. As for skewness, a positive skewed or right skewed data is
so named because the "tail" of the distribution points to the right, and because its skewness
value will be greater than 0 (or positive). GDO growth is often skewed in this manner: many
countries grow relatively little, while increasingly few countries grow faster. The range of the
data is around 10.56, which might be a big difference in the GDP growth of two countries.
The maximum and the minimum of the data set are 2.81%, rescpectively 7.75%. The total
sum of the growths for these countries resulted in a number of 53% for a total number of 30
countries.
The next data set on which I have analysed the descriptive statistics is the household
consumption, as you can see in the Figure 10.
Figure 10. Household consumption expenditure(% of GDP)
Mean
Standard Error
Median
Mode
Standard Deviation
Sample Variance
Kurtosis
Skewness
Range
Minimum
Maximum
Sum
Count

56.01328083
1.867776652
57.04551133
#N/A
10.23023405
104.6576886
-0.031505885
-0.590229432
41.38900656
32.82569233
74.21469888
1680.398425
30

As for the private consumption, from the data set it has resulted a mean of 56%,
meaning that this is the average percentage for the 30 countries of their private
consumption related to their GDP. From the median, we understand that half of the
countries have registered a private consumption as a percentage of the GDP below 57%,
whlie half of the countries registered more than this number. Again, as there are no identic
data, there is no mode that can be shown. The standard deviation for this particular
indicator is around 10, meaning that the values can fluctuate more or less 10% from the
mean. A distribution with a negative kurtosis value indicates that the distribution has lighter
tails and a flatter peak than the normal distribution. Left skewed or negative skewed data is
so named because the "tail" of the distribution points to the left, and because it produces a
negative skewness value. As we have seen in the histogram also, there were more countries
on the left side of the histogram. The range for this indicator is 41.38%, which is the
difference between the minimum value, 32.82%, and the maximum, 74.21%.

Figure 11. Inflation, consumer prices (annual %)

Mean
Standard Error
Median
Mode
Standard Deviation
Sample Variance
Kurtosis
Skewness
Range
Minimum
Maximum
Sum
Count

3.099765888
0.478766426
2.644560242
#N/A
2.622311712
6.876518715
1.580042087
1.321443899
10.69720359
-0.66694456
10.03025902
92.99297663
30

In the Figure 11, the mean for the inflation indicator is 3.09%, meaning that on average those
countries have a level of inflation around 3%. Based on the median, half of the countries have an
inflation level below 2.64%, and the other half have more than this level. We do not have a mode for
this indicator, as well, so there is no value to be the same for two countries. In terms of the standard
deviation, on average, the inflation level can fluctuate more or less then the medin by 2.62%. The
same as for the first indicator, GDP growth, we have encountered for the inflation level a positive
Kurtosis and Skewness, so there are more countries in the first intervals by their grouping. The range
is around 10.7%, which is the difference between the maximum level registered by the 30 countries,
10% and the minimum -0.66%.
Finally, in the figure 12, we have the desciptive analysis for the last indicator, population
growth.
Figure 12. Population growth (annual %)
Mean
Standard Error
Median
Mode
Standard Deviation
Sample Variance
Kurtosis
Skewness
Range
Minimum
Maximum
Sum
Count

0.78218298
0.163521005
0.732897464
#N/A
0.895641433
0.802173576
1.081759467
-0.230300358
4.154488678
-1.691348956
2.463139721
23.46548939
30

For this last indicator, we have a mean of 0.78, meaning that on average this is the
percentage that these countries have in terms of their annual population growth. Regardin the
median, it is shown that half of the countries have a population growth below 0.73%, while the other
have has more than this number. For this indicator, we have no mode. The standard deviation shows
us that the growth for this countries deviates from the median with around 0.90%. What is a little
strange is the fact that we encountered a positive Kurtosis and a negative Skewness, meaning that

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the value indicates that the distribution has heavier tails and a sharper peak than the normal
distribution as for kurtosis and it is left skewed.

5. Scatter Diagram
Scatter plot diagram
Population growth (annual %)

10

0
-2

-2

-1

-1

-2

-4

GDP growth (annual %)

For creating this scatter plot diagram, I have chosen two out of the 4 indicators, and those
are the GDP growth and the Population growth. We can analyse this graphic by 3 major
characteristics: direction, form and strenght.
In terms of the direction, we can see very well that there is a positive direction. The data
goes from lower values and it increases on the both axis. The higher the GDP growth, the higher the
population growth we have. As for the form of the scatter diagram, there is a tendancy of a linear
association of these values, forming a trend line, but if we take into consideration the strenght, we
conclude that there is a moderate" positive correlation.
We have to mention also, that there a few outliers which influence the diagram, giving it this
moderate correlation. Excluding the outliers, we would have a strong correlation between the two
variables.

6. Covariance and Coefficient of Correlation

Covariance indicates how two variables are related. A positive covariance means
the variables are positively related, meaning that when a variable increases, the other
acts the same, while a negative covariance means the variables are inversely related,
which is in opposite reaction.
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For the 4 indicators that I have analysed, they had both positive and negative
covariance. The covariance between GDP growth and the household consumption was
-3.49, so when the first indicator increases, the other one decreases. Between the GDP
and the inflation, we had a covariance of 0.72, meaning that when the first one
increases, the second one increases as well, and for the GDP and population growth, the
covariance was 0.88, positive related
The household consumption and inflation have a covariance of 7.20, and for between
household and population growth is -3.06, having a negative relation for the two
indicators. Between the inflation and population growth there is postive related
correlation, of 0.39.

Correlation is another way to determine how two variables are related. In addition
to telling you whether variables are positively or inversely related, correlation also tells
you the degree to which the variables tend to move together.
Correlation standardizes the measure of interdependence between two variables
and, consequently, tells you how closely the two variables move. The correlation
measurement, called a correlation coefficient, will always take on a value between 1 and
1:
In our case, the coefficient of correlation between GDP growth and household
consumption is -0.1406, meaning that they do not move together. On the other hand,
between GDP and inflation level, I have encountered a positive correlation 0.1144, meaning
that when it is increasing, the other one follows. The same we can say about GDP and
population growth, with a coefficient of correlation of 0.4049.
The household consumption and the inflation have a correlation of 0.2779, while
with the population growth it has a negative one, of -0.3462. And finally, the correlation
between inflation level and population growth is -0.3462, so they are negative correlated.
The closer the correlation coefficient is from the two extremes, -1 and 1, the stronger
the positive or negative correlation between two indicators. So, the strongest one is in the
case of GDP growth and population growth.

7. Spearman correlation-nonparametric measurement

All correlation analyses express the strength of linkage or co-occurrence between to
variables in a single value between -1 and +1. This value is called the correlation
coefficient. A positive correlation coefficient indicates a positive relationship between
the two variables (the larger A, the larger B) while a negative correlation coefficients
expresses a negative relationship (the larger A, the smaller B). A correlation coefficient
of 0 indicates that no relationship between the variables exists at all. However
correlations are limited to linear relationships between variables. Even if the correlation
coefficient is zero a non-linear relationship might exist.
For this correlation, I have chosen the same indicators as in the scatter diagram, the
GDP growth and the population growth. Based on this method of analysis, the Spearman
coefficient of correlation was -0.00333704, which is pretty much closely to 0. As I said
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earlier, this could mean that the two variables are not correlated and it tends to go into
the negative correlation, meaning that when a variable increases, the other might
decrease.

Conclusions
As a conclusion, there are various methods in which you can interpret and analyze a
set of data, each method serving a different purpose. The various the methods of
analysing, the better understanding you get from the relation between more variables.
In terms of my research, I think that there will always be a correlation between every
indicator or every action which is related to the human action. Everyone is acting in his
own manner, but since we are all people, we might think the same way at a certain
point. We all want the best we can get from our life and we can see this from a set of
indicators as I have analysed. Even if, we might thing that a small action has not an
influence on another one, well, in the end it seems that it has.

Project realised by:

Adrian Cosmin Marin
Applied Modern Languages
International Business and Economics
Group:948

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