Applicability of Harrod-Domar Model in Explaining Economic Growth in the Philippines

Abstract

This paper ought to determine and examine whether the Harrod-Domar model is applicable in explaining the economic growth in the Philippine setting from 1981 to 2021, whereas the variables are Gross Savings and Gross Capital Formation. Using the multivariate Ordinary Least Squares (OLS) regression, the results showed that all independent variables are shown to be positively significant parameters of GDP growth. Furthermore, several tests employed in the study, including the Variance Inflation Factor, the Breusch-Godfrey test, Breusch-Pagan-Godfrey, have no evidence of multicollinearity or autocorrelation and heteroscedasticity in the regression model. The Harrod-Domar Model economic growth that is focused on in this study was popular among developed countries, yet considering the Philippines is one of the developing countries in the world, the researchers aim to understand whether the Harrod-Domar Model is applicable in the Philippine settings.