Modelling Economic Growth: Panel Data Approach

The Gross Domestic Product (GDP) plays a pivotal role as a key economic indicator. There are numerous factors that contribute to the formation of GDP. Hence, this research attempts to identify the best-fit panel model for GDP among selected countries in Southeast Asia and determine the significant factors influencing their GDP. The data used is the panel data that consist of GDP, Consumer Price Index (CPI), Unemployment Rate (UR) and population growth (POP) from 2003 to 2022 for Malaysia, Thailand, Indonesia, Brunei and Singapore. The methods of pooled, fixed and random effects models are employed. The fixed effects model reveals substantial impacts of variables like UR, POP, and CPI on GDP. The random effects model, validated through the Breusch-Pagan test, demonstrates superior adaptability to country heterogeneity. The Hausman test supports the random effects model as a more reliable framework than fixed effects. The unemployment rate and population growth affect significantly towards GDP.