Analyzing the Impact of Final Consumption Expenditure and Gross Capital Formation on GDP Growth in the Western Balkans

Abstract

This study examines the determinants of GDP growth using a pooled Ordinary Least Squares (OLS) regression analysis. The analysis incorporates key variables such as final consumption expenditure (% of GDP), final consumption expenditure growth (annual %), gross capital formation (% of GDP), and gross capital formation growth (annual %). The findings reveal that the growth rates of final consumption expenditure and gross capital formation have significant positive impacts on GDP growth, while their static levels do not show significant effects. These results underscore the importance of dynamic economic policies aimed at stimulating consumption and investment growth. The study suggests that integrated, flexible, and holistic policy approaches are essential for achieving sustained and robust economic growth. Policymakers are encouraged to focus on enhancing consumer spending, promoting private and public investments, and fostering innovation to drive long-term economic performance.