The Relationship of Economic Growth with Consumption, Investment, Unemployment Rates, Saving Rates and Portfolio Investments in The Developing Countries

The Keynesian macroeconomic model implies that household expenditures, investments, and savings have significant impacts on economic growth by affecting total expenditures. Therefore, policymakers should determine and apply appropriate policies to maintain these variables. For this purpose, the relationship of economic growth with consumption, investment, unemployment, portfolio investments and saving rates in the Brazil, Russia, India, South Africa and Turkey are analyzed with the panel data method using annual data for the period 2005-2016. Saving rates appear to have the most impact on economic growth in accordance with the estimation results of Prais-Winsten Panel Correlated Standard Errors and Feasible Generalized Least Squares which take cross-section dependence into consideration. A 1% increase in saving rates increases economic growth by 0.50%. An increase of 1% in consumption expenditures increases economic growth by 0.41%. While an increase of 1% in investment expenditures increases economic growth by 0.25%, the increase in portfolio investments is insignificant, eventhough its impact on economic growth is positive. An increase in unemployment rates negatively affects economic growth in compliance with the theory.