Abstracto

Cluster Analysis of Macroeconomic Indices

MM Kembe, AA Onoja

Macroeconomic indicators, help to shows the market values of shares transactions in a country, is of paramount concern on the issue relating to the economic development of nations and, thus, an analysis of its immediate causes is inevitable. There is also the view of development economists and policy makers that a well-developed macro economy is crucial for the mobilization of financial resources for long-term investment and thus constitutes one of the major pillars of economic growth. Cluster analysis classifies data into groups such that data in the same group are similar but significantly different from data in other clusters. In finance, these macroeconomic indices reflect the general performance of the Nigeria economy. The economy is the concern of how wealth is made, circulated, and meets its end. It centers on the pattern in which a country creates, disseminate, and consumes the tangible material commodities of life. However, the Gross Domestic Product (GDP) can be influenced by some of these macroeconomic indices. This research work is set out to identify, investigate, and classify the highlighted scenario to with; the relationship between macroeconomic indices in Nigeria and the economic growth. Some of the macroeconomic indices can be sort using Cluster analysis. Cluster Analysis is appropriate when you must classify some observed variables and wish to develop similarity between the numbers of artificial variables (called clusters) that will account for most of the similarities in the observed variables. Two-step clustering technique was adopted for the study. This procedure is an exploratory tool designed to reveal natural groupings (or clusters) within a dataset that would otherwise call for similarity. The Similarity measure of between the clusters formed was determined. Thirteen input variables were used to extract the groups via; (Macroeconomic factors: Gross Domestic Product, Public Finance, Fixed Asset, Private Investment, Net Export, Consumption, Net Savings, External Reserve, Net Import, and Balance of Payment, inflation rate, Forex Rate, and public debt). They Were classified based on the Gross Domestic Product of Nigeria from 1980 – 2010. The Cluster analysis results indicate that macroeconomic indicators tested have the significant influence on the Nigerian economy (Gross Domestic Product). From the ANOVA table, the cluster membership was used as a factor and tested against the Gross Domestic Product shows that it is significant (P = 0.000) which lead to the rejection of the null hypothesis. It is recommendable that the Government of the day should pay more heels to our External Reserves, Fixed Assets, Consumption, Net Savings than any other macroeconomic factors in boosting a reliable Gross Domestic Product.