Key macroeconomic indicators of economic growth in the case of developing countries

Abstract

The neoclassical Solow-Swan economic growth theory of 1956, also known as the exogenous growth model, advocates for the accumulation of physical capital as an important driver of economic growth in the short run, while technological advancement is the key determinant of economic growth in the long run (Chirwa & Odhiambo, 2016). The main aim of this study is to measure the impact of some key macroeconomic factors, which influence the economic growth of a developing country, in our case, the Republic of Kosovo. This study uses secondary data from The World Bank Indicators for the time period 2010–2020. In this study, the ordinary least squares (OLS) econometric model is employed, the dependent variable used is the gross domestic product (GDP) growth, and the independent variables used are private consumption, remittances, export, and employment. Growth in an economy is measured by a change in the volume of its output or the real expenditure or income of its residents (The World Bank, n.d.-d). The study comes to the conclusion that the OLS model is important under the study circumstances thus the independent variables such as consumption, employment, exports, and remittances have a positive impact on Kosovo’s economic growth measured by GDP. The study comes with further recommendations such as increasing employment, using more effectively the remittances received from the diaspora, and increasing the exports for Kosovo to gain economic growth and sustainability.