3.4 Explanation of the Variables under the Study
GDP is the entire market value of all finished goods and services made in a country in a year equals to total investment, consumer and government spending. Also incomes from export subtract that of imports in a given year. Gross domestic product is derived from the general character of government investments, consumption, spending and net export.
Public investment are the expenditures used by the government to finance investment projects such as railway lines, roads construction, harbors, airports and aircrafts, and also used in housing sector with expectations of future returns both directly and indirectly from the use of all the services. This is replaced by taking the difference between government expenditure minus health expenditures and educational expenditures.
Health expenditures are those costs used in the health segment of the government such as providing medical care to its people and purchasing of new medical devices for better provision of healthier medical services. Moreover it comprises of the cost of on job training and the cost of conducting productive seminars that facilitate the discussion of awareness of providing better medical health services.
Defense expenditures comprise of all sum of government fund directed by the members of the government for the defense purposes of a country in a given year. It comprises payments made on buying new military equipment, on the job training and moreover the sum of funding allocated to obtaining and training of new trainees in the defense force, furthermore export implies values of tradable products from all sections of the economy sold outside of the country for a given year in a formal way.
Education expenditures comprise those payments detailed in the budget of a given year to finance education in all its levels starting from primary school, secondary schools, all the way to its tertiary level. Expenditures on these sectors include construction, maintenance and reconstruction of buildings, purchasing of books and all required stationery materials and also includes wages. These data can all be obtained directly from the national bureau of statistics.
3.6 Tests Performed Under Time Series Data
Assessment of regression model without giving into consideration of stationarity of the time series data result to unauthentic regression results that are not accurate in prediction and forecasting. The study first examines the stationarity of data; long run relationship between variables and error correction model is developed if criteria are satisfied as discussed below.