Determinants of Economic Growth in Republic of North Macedonia : An Empirical Study

Abstract

Economic growth is an increase in the production of goods and services over a specific
period. Gross domestic product (GDP) is the best way to measure economic growth. It
takes into account the country's entire economic output. It includes all goods and
services that businesses in the country produce for sale. It doesn't matter whether they
are sold domestically or overseas. Of more importance is the growth of the ratio of GDP
to population (GDP per capita), which is also called per capita income. An increase in
per capita income is referred to as intensive growth.The current study tried to examine
contribution of four major sectors (agriculture, industrial and services sector and labor
force participation rate) of the economic growth in the Republic of North Macedonia,
using Pearson test for correlation and hypothesis testing. The study used the time
series data set from 1996 to 2019. As a indicator of economy performance we used GDP
growth per capita (annual%). From the hypothesis testing we can conclude that there
is significant correlation between GDP per capita growth as a dependent variable with
agriculture and services, while there is not statistical significant correlation between
dependent variable and variables labor force and industry. In order to determine the
strength and direction of the relationship between GDP per capita and agriculture and
services we use the correlation coefficient, ρ (rho). Estimations confirmed that
relationship between GDP per capita and agriculture is moderate and positive, while
correlation between GDP per capita and services is weak and positive, which means,
increasing in agriculture and service will result in increase in GDP per capita, and vice
versa.