ISSN 1822-6515 ISSN 1822-6515

EKONOMIKA IR VADYBA: 2011. 16 ECONOMICS AND MANAGEMENT: 2011. 16

116
REGRESSION ANALYSIS OF GROSS DOMESTIC PRODUCT
AND ITS FACTORS IN LITHUANIA
Viktorija Bobinaite
1
, Aldona Juozapaviciene
2
, Inga Konstantinaviciute
3
1
Kaunas University of Technology, Lithuania, viktorija_bobinaite@yahoo.com
2
Kaunas University of Technology, Lithuania, aldona.juozapaviciene@ktu.lt
3
Lithuanian Energy Institute, Lithuania, inga@mail.lei.lt
Abstract
Analysis of the interrelationship between Lithuanian GDP at previous year prices and its factors
(capital, energy, land and labour) during 1995-2009 has been performed in the paper. Univariate and
multivariate regression have been the main method employed to set the interrelationships between the
selected variables. The results of the regression analysis have showed that development of fixed capital
consumption might well describe the changes of GDP in Lithuania. An increase of consumption of fixed
capital by 1 million LTL might improve Lithuanian GDP by 8.3 million LTL. Other factors that have not
been included in the model have reduced GDP by 13062.6 million LTL. Fixed capital consumption could
explain 91.54% of development of Lithuanian GDP. Model, which has been calculated considering the
segregation of gross inland energy consumption according to types of fuel and energy, has showed that both
fixed capital consumption and consumption of indigenous resources, nuclear energy, natural gas and oil
products might explain development of Lithuanian GDP. In the model all coefficients of variables, except a
coefficient of nuclear energy, have been found to be positive. A negative effect of nuclear energy on GDP
might appear through the impact of nuclear energy consumption on households consumption expenditure.
The results have told that Lithuanian GDP has been sensitive over consumption of indigenous resources,
including renewable energy sources, as well over consumption of natural gas. An increase of indigenous
resources by 1 ktoe might improve GDP by 82.6 million LTL and an increase of natural gas by 1 ktoe could
augment GDP by 13.9 million LTL. An effect of indigenous resources and natural gas on GDP might pass
through these resources effect on gross capital formation. Net exports of goods and services have been
influenced by consumption of natural gas and oil products. The higher the countrys dependency on
consumption of natural gas and oil products the worse volume of net exports of good and services.
Keywords: economic growth, gross domestic product, energy consumption, land, capital, labour,
regression.
JEL Classification: E21, E22, E23, O11, O41, O43.
Introduction
Scientific literature is numerous of theoretical and empirical research about development of gross
domestic product (further in the text GDP). Scientists (Abu-Bader & Abu-Qarn, 2003; Yanikkaya, 2003;
Hsiao & Hsiao, 2006; ekut & Tvaronaviius, 2007; Dutt & Ros, 2007; Herranz-Loncn, 2007;
Mahadevan & Asafu-Adjaye, 2007; Ang, 2008; Christiaans, 2008; Lapinskien & Peleckis, 2009;
Lapinskien & Tvaronaviien, 2009; Laktutien, 2009; Snieska & Simkunaite, 2009; Karazijiene, 2009;
Wu et al., 2010; Wei & Hao, 2010; Zilinske, 2010; Kilijoniene et al., 2010; Sharma, 2010; Hassan, 2011;
Lee, 2011; Roa et al., 2011) have found various reasons for GDP to change and economy to grow. Some
scientists (Ang, 2008; Laktutien, 2009; Hassan, 2011) argue that financial development is an important
determinant for economy to grow. Well-functioning financial system promotes private saving and private
investment and leads to higher economic growth through the improved efficiency of investment. Although
these scientists have agreed that efficient financial system is necessary, however they have emphasized that
this is not a sufficient condition to reach a stable economic growth. Other variables such as government
expenditure (Abu-Bader & Abu-Qarn, 2003; Wu et al., 2010), public sector borrowing (Karazijiene, 2009),
foreign direct investment (Hsiao & Hsiao, 2006; ekut & Tvaronaviius, 2007; Zilinske, 2010), investment
in infrastructure (Herranz-Loncn, 2007; Snieska & Simkunaite, 2009), demographic factors (Wei & Hao,
2010; Roa et al., 2011), labour market characteristics (Roa et al., 2011), aggregate demand shocks (Dutt &
Ros, 2007), inflation (Hung, 2003; Valdovinos, 2003; Mahadevan & Asafu-Adjaye, 2007), energy prices
(Adjaye, 2000; Lee & Chu, 2011), trade (Yanikkaya, 2003; Hsiao & Hsiao, 2006; Christiaans, 2008; Lee,
2011) and other might play an important role in explaining development of GDP. Considering trade,
interesting results have been found by Kaneko (2000). Scientist has found that if a country specializes in a
capital commodity, then its growth rate is unaffected by trade. However if it specializes in a consumption
commodity, then growth rate is significantly influenced by trade, i.e. the higher the terms of trade are, the
higher the growth rate is, and vice versa. Currently, there has been found a growing number of literature
ISSN 1822-6515 ISSN 1822-6515
EKONOMIKA IR VADYBA: 2011. 16 ECONOMICS AND MANAGEMENT: 2011. 16


117
analyzing effect of energy on development of GDP (Chen et al., 2007; Chien, & Hu, 2008; Narayan &
Smyth, 2008; Akinlo, 2009; Apergis & Payne, 2009; Apergis et al., 2010; Ozturk & Acaravci, 2010).
Scientists have not been of uniform opinion on the effect of energy consumption and GDP. Thus, one of the
four hypotheses has been approved, i.e. conservation, economic growth, bi-directional causality, and
neutrality hypotheses.
Although scientific literature is well-off publications on factors influencing GDP development and
economic growth, however these studies usually analyze only impact of a specific factor. Systematic
research, combining the effect of different factors, has been rarely found. In this respect valuable research
has been performed by Sharma (2010). Scientist has considered that GDP in a panel of 66 countries has been
a function of inflation, gross fixed capital formation, trade, labour force and energy. Lee & Chang (2007)
have used a neoclassical growth model and analyzed the effect of capital stock, labour services, productive
energy and real exports on GDP. This paper contributes to existing scientific literature in a way it analyses
the relationships between GDP and factors influencing it in Lithuania.
Thus, the aim of the article is to perform a regression analysis of GDP and factors (fuel and energy
consumption, labour, agricultural land, fixed capital consumption) influencing it in Lithuania during 1995-
2009.
Seeking to implement the aim, the following tasks have been set:
to briefly describe the methodology applied in investigation of relationships;
to overview the development of GDP, agricultural land, labour, fixed capital and fuel and energy
consumption in Lithuania;
to assess univariate and multivariate interrelationships between selected variables and GDP.
In order to exercise these tasks the following methods have been applied: analysis of scientific
literature, quantitative analysis of selected statistical data, regression analysis.
Methodology for regression analysis
Regression analysis of GDP and its factors will be performed following the methodology described by
Boguslauskas (2004), Bliekien et al. (2006). Univariate and multivariate linear regression models have been
prepared. EXCEL has been used to assess univariate relationships between the selected variables, whereas
STATISTICA has been applied for calculations of multivariate linear regression models. In this section of
the paper multivariate linear regression methodology will be briefly described.
In a broad sense a multivariate linear regression model, which will be used in the paper, will have the
following forms (1), (2), (3) and (4):
) x , x , x , x , x , x , x , x , x , x , x , x ( f y
H E NEX OP NG CO NE IR GIEC FC L LA GDP
= (1)
) x , x , x , x , x , x , x , x , x , x , x , x ( f y
H E NEX OP NG CO NE IR GIEC FC L LA C
= (2)
) x , x , x , x , x , x , x , x , x , x , x , x ( f y
H E NEX OP NG CO NE IR GIEC FC L LA I
= (3)
) x , x , x , x , x , x , x , x , x , x , x , x ( f y
H E NEX OP NG CO NE IR GIEC FC L LA NX
= (4)
Here:
y
GDP
gross domestic product at previous year prices, million LTL;
y
C
household consumption expenditure, million LTL;
y
I
gross capital formation, million LTL;
y
NX
net exports of goods and services, million LTL;
x
LA
agricultural land, ha;
x
L
number of people employed, thousand people;
x
FC
consumption of fixed capital, million LTL;
x
GIEC
gross inland energy consumption, ktoe;
x
IR
consumption of indigenous resources, ktoe;
x
NE
consumption of nuclear energy, ktoe;
x
CO
consumption of coal, ktoe;
x
NG
consumption of natural gas, ktoe;
x
OP
consumption of oil products, ktoe;
x
NEX
net electricity export, ktoe;
x
E
gross consumption of electricity, ktoe;
x
H
gross consumption of heat, ktoe.
ISSN 1822-6515 ISSN 1822-6515
EKONOMIKA IR VADYBA: 2011. 16 ECONOMICS AND MANAGEMENT: 2011. 16


118
The coefficients of the regression models have been calculated using STATISTICA program package.
The significances of coefficients b
j
have been checked using (5):
1 m n ;
j
j
t
) b ( SE
b

>

(5)
Here: b
j
coefficient of independent variable x and it has been calculated by STATISTICA;
SE(b
j
) standard errors of coefficient b
j
and it has been calculated using STATISTICA;
theoretical value of Stjudent criteria, where
1 m n ;
t

is a level of significance, n is a
number of observations and m is a number of independent variables.
If equation (5) is valid, then coefficient b
j
is significant. In the case coefficient b
j
is not significant it
has to be removed from the regression model and new variant of the model has to be prepared.
Determination coefficient D has been calculated using STATISTICA. Significance of determination
coefficient D has been tested using (6):
1 m n ; m ;
F
) D 1 (
) 1 m n ( * D

>

(6)
Here: D coefficient of determination and it is calculated using STATISTICA;
theoretical value of Fisher criteria, where
1 m n ; m ;
F

is a level of significance, n is a
number of observations and m is a number of independent variables.
If equation (6) is valid, then coefficient of determination is significant and calculated regression model
is adequate.
Based on the methodology described above regression analysis will be performed. The main results
will be presented in the next sections of the paper.
Tendencies and structure of GDP, agricultural land, labour, fixed capital and energy
consumption in Lithuania
In order to better understand the relationships between Lithuanian GDP and its factors, analysis of
selected variables have to be analyzed. Namely, this section of the paper deals with this task.
Figure 1 represents development of Lithuanian GDP, calculated at previous year prices, during 1995-
2009.


Figure 1. GDP at previous year prices by kind of expenditure during 1995-2009
Figure 1 has showed that Lithuanian GDP calculated at previous year prices has had a tendency to
grow by 10.8% a year during 1995-2008. The growing rates of gross capital formation, household
consumption expenditure and general government consumption expenditure by 13.1%, 10.9% and 8.5% a
ISSN 1822-6515 ISSN 1822-6515
EKONOMIKA IR VADYBA: 2011. 16 ECONOMICS AND MANAGEMENT: 2011. 16


119
year, respectively have had an influence on the growth of GDP. During the analyzed period there has been
noticed a growing volume of net imports of goods and services to the country, which respectively suppressed
GDP growth rates. In 2009, a picking up steam global economic crisis has adjusted growth rates of GDP.
There has been noticed a 6.4% decrease of GDP in 2009 compared to 2008. The slump of GDP has been
influenced by reduced volume of gross capital formation. In 2009, gross fixed capital formation has made
only 42.6% of its level in 2008. It is worth noting that for the first time net exports of goods and services
(volume has been 1010.4 million LTL) have been fixed in Lithuania in 2009. Saboniene (2009) argues that
exports are valuable since they have allowed domestic industries to achieve some economies of scale,
which otherwise would not have been possible due to the limited domestic market size.
During the same period agricultural land in Lithuania has been reducing (Figure 2).

3
4
6
3
5
7
1
3
4
6
5
3
3
2
3
4
6
4
4
7
9
3
4
6
8
3
8
3
3
4
8
2
9
4
6
3
4
8
3
8
9
5
3
4
8
7
3
9
7
3
4
8
7
1
2
1
3
4
8
8
7
3
0
3
4
9
5
5
3
4
3
4
9
6
7
6
0
3
5
0
2
1
0
4
3
5
0
4
0
0
4
3
5
0
7
5
0
8
3
5
1
1
0
1
6
3420000
3440000
3460000
3480000
3500000
3520000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
h
a

Figure 2. Tendencies of agricultural land
Figure 2 has presented that every year on average agricultural land has had a tendency to reduce by
0.1%. In 2009, it has made 3463571 ha: plough land has made 84.5%, gardens 0.3%, grassland and grazing
land 13.8%. With reference to statistics of the National Land Service (NLS, 2010), the purpose of 3361611
ha has been agricultural activities and 24136 ha forestry in 2009.
Figure 3 represents tendencies of people employed in economic activities in Lithuania.

1
6
5
0
1
7
8
7
1
7
9
5
1
7
4
9
1
7
2
4
1
6
7
8
1
6
8
7
1
6
5
3
1
5
8
7
1
6
5
3
1
7
2
2
1
7
7
8
1
7
8
1
1
7
7
1
1
7
7
2
1450
1500
1550
1600
1650
1700
1750
1800
1850
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
t
h
o
u
s
a
n
d

o
f

p
e
o
p
l
e

Figure 3. Tendencies of employment
Figure 3 has showed that employment has been developing inconsistently in Lithuania. Martinkus et
al. (2009) has analyzed employment in the Baltic States during 2001-2007. They have noticed that the
regional EU policy support and economic growth, stimulated by increased aggregate demand, have directly
influenced on the changes of employment. It has been set that 1 million LTL of EU support might increase
ISSN 1822-6515 ISSN 1822-6515
EKONOMIKA IR VADYBA: 2011. 16 ECONOMICS AND MANAGEMENT: 2011. 16


120
employment by 0.64%. The largest shifts in employment have appeared due to changes in youth
employment, which annually has increased by 1.9% during 2001-2007. Besides, employment has been
influenced by increased labour demand in service sector. As a result of recession, when demand for goods
and services have suddenly fallen, employment has also reduced by 7.7% in 2009 compared to 2008.
In Figure 4, consumption of fixed capital has been presented.

0
2000
4000
6000
8000
10000
12000
14000
16000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
m
i
l
l
i
o
n

L
T
L
Agriculture, hunting and forestry Fishing
Mining and quarrying Manufacturing
Electricity, gas and water supply Construction
Wholesale and retail trade Hotels and restaurants
Transport, storage and communication Financial intermediation
Real estate, renting and business activities Public administration and defence
Education Health and social work
Other activities

Figure 4. Consumption of fixed capital in economic activities in Lithuania
Figure 4 has represented that consumption of fixed capital has been growing by 5.4% a year. The
highest growth rates have been noticed during strong economic growth period. In 2009, there have been
consumed 13825.19 million LTL of fixed capital: 17.5% in real estate, renting and business activities, 17.3%
in public administration and defence, 15.9% in manufacturing, 12.8% in transport, storage and
communication. All other economic activities have consumed less than 10% of fixed capital each.
Figure 5 shows development of gross inland energy consumption in Lituania.

-2000
0
2000
4000
6000
8000
10000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
k
t
o
e
Indigenous resourses Nuclear energy Coal Natural gas Oil products Net electricity import*

* electricity import minus electricity export
Figure 5. Gross inland energy consumption during 1995-2009
Figure 5 has showed that historically nuclear energy has made one-third of all energy and fuel
consumed in Lithuania. Volume of it has noticeably decreased during recession period, which has been
caused by Russian economic crisis. Natural gas has made about 25% in the structure of gross inland energy
consumption. It is worth noting that consumption of indigenous resources has been permanently increasing
and its share has rose from 6.6% (1995) till 12.9% (2009). In more details energy consumption in Lithuania
has been analyzed by Miskinis et al. (2006), Katinas & Markevicius (2006), Katinas et al. (2007), Klevas et
al. (2007), Streimikiene (2007), Streimikiene (2008), Kontsnatinaviit et al. (2010).
ISSN 1822-6515 ISSN 1822-6515
EKONOMIKA IR VADYBA: 2011. 16 ECONOMICS AND MANAGEMENT: 2011. 16


121
Thus, the analyses of tendencies have showed different developments of selected variables. Initial
research has revealed the reasons for variables to change too. Seeking to better understand the development
of GDP all these variables have been decided to integrate into one model. Univariate and multivariate
regression models have been prepared.
Univariate regression models
In the initial stage, it has been decided to look over and assess the relationships between Lithuanian
GDP and each of it factors. For this purpose univariate regression models have been calculated for Lithuania.
The relationship between agricultural land, people employed in economic activities, fixed capital
consumption, gross inland energy consumption and GDP have been presented in Figure 6.

y =7.9905x +44738
R
2
=0.0005
0
20000
40000
60000
80000
100000
120000
1550 1600 1650 1700 1750 1800 1850
t housand people
m
i
l
l
i
o
n

L
T
L
People employed - GDP
Linear (People employed - GDP)
y =94698Ln(x) - 798304
R
2
=0.9382
0
20000
40000
60000
80000
100000
120000
5000 7000 9000 11000 13000 15000
Fixed capit al, million LTL
G
D
P
,

m
i
l
l
i
o
n

L
T
L
Fixed capital consumption - GDP
Log. (Fixed capital consumption - GDP)
y =7.6581x - 8618.4
R
2
=0.0397
0
20000
40000
60000
80000
100000
120000
7000 8000 9000 10000
ktoe
m
i
l
l
i
o
n

L
T
L
Gross inland energy consumptio - GDP
Linear (Gross inland energy consumptio - GDP)
Figure 6. Relationships between GDP and factors of production in Lithuania during 1995-2009
Figure 6 has presented that development of agricultural land, consumption of fixed capital might well
describe changes of GDP in Lithuania during 1995-2009. Regression model representing linear relationship
between the use of agricultural land and GDP has showed that higher level of GDP might be achieved by
lowering the use of agricultural land, whereas logarithm model presenting relationship between consumption
of fixed capital and GDP has disclosed that GDP might be improved by increasing consumption of fixed
capital. Thus far there has not been found a statistically significant relationship between the number of
people employed and GDP and between gross inland energy consumption and GDP. These notwithstanding
there have been observed positive linkages between GDP and number of people employed and GDP and
gross inland energy consumption, i.e. an increase of people employed by 1 thousand and consumption of
gross inland energy by 1 ktoe might improve GDP by 7.99 million LTL and 7.66 million LTL, respectively.
Since gross inland energy consumption has consisted of several types of fuel and energy, therefore it
has been decided to assess the relationships between consumption of specific fuels and energy and GDP. The
graphic view of Lithuanian GDP and various types of fuels and energy is presented in Figure 7. It has
showed that development of consumption of indigenous resources, natural gas, electricity and heat have been
closely related to changes of Lithuanian GDP. Mentioned types of energy and fuel might explain 92.9%,
52.78%, 58.55% and 56.74% of GDP development in Lithuania, respectively. The relationships between
other types of fuels and GDP have not been found significant. This has told that there have not been clear
ISSN 1822-6515 ISSN 1822-6515
EKONOMIKA IR VADYBA: 2011. 16 ECONOMICS AND MANAGEMENT: 2011. 16


122
univariate linkages between consumptions of nuclear energy, coal, oil products, net electricity exports and
GDP.

y =142.04x - 62395
R
2
=0.929
0
20000
40000
60000
80000
100000
120000
400 600 800 1000 1200
kt oe
m
i
l
l
i
o
n

L
T
L
Indigenous resources - GDP
Linear (Indigenous resources - GDP)

y =-14.944x +103981
R
2
=0.1419
0
20000
40000
60000
80000
100000
120000
1400 2400 3400 4400
kt oe
m
i
l
l
i
o
n

L
T
L
Nuclear energy - GDP
Linear (Nuclear energy - GDP)

y =151.66x +32552
R
2
=0.1196
0
20000
40000
60000
80000
100000
120000
0 50 100 150 200 250 300
kt oe
m
i
l
l
i
o
n

L
T
L
Coal - GDP Linear (Coal - GDP)

y =57.766x - 70405
R
2
=0.5278
0
20000
40000
60000
80000
100000
120000
1600 1800 2000 2200 2400 2600 2800 3000
kt oe
m
i
l
l
i
o
n

L
T
L
Natural gas - GDP
Linear (Natural gas - GDP)

y =-18.679x +110399
R
2
=0.0958
0
20000
40000
60000
80000
100000
120000
2000 2500 3000 3500 4000
kt oe
m
i
l
l
i
o
n

L
T
L
Oil products - GDP
Linear (Oil products - GDP)

y =-47.269x +73459
R
2
=0.1582
0
20000
40000
60000
80000
100000
120000
0 100 200 300 400 500 600 700
kt oe
m
i
l
l
i
o
n

L
T
L
Net electricity export - GDP
Linear (Net electricity export - GDP)
y =277.46x - 219286
R
2
=0.5855
0
20000
40000
60000
80000
100000
120000
800 900 1000 1100 1200
kt oe
m
i
l
l
i
o
n

L
T
L
Electricity - GDP
Linear (Electricity - GDP)

y =-58.077x +138534
R
2
=0.5674
0
20000
40000
60000
80000
100000
120000
1000 1200 1400 1600 1800 2000
kt oe
m
i
l
l
i
o
n

L
T
L
Heat - GDP Linear (Heat - GDP)

Figure 7. Relationships between fuel and energy consumption and GDP in Lithuania during 1995-2009
ISSN 1822-6515 ISSN 1822-6515
EKONOMIKA IR VADYBA: 2011. 16 ECONOMICS AND MANAGEMENT: 2011. 16


123
Thus, economic literature has suggested and results of empirical research have told that countries
GDP might be created using various factors and different combinations of these factors historically have
been used in national economies. Hence, it has been decided to integrate all these factors into one model. The
results of multivariate regression models will be presented in the section below.
Multivariate regression models
Seeking to set the relationships between Lithuanian GDP, agricultural land, people employed in
economic activities, consumption of fixed capital and gross inland energy consumption, regression models
have been prepared. The results of the models are presented in Table 1.
Table 1. Multivariate regression models of GDP
Equation
Determi-
nation
coeffi-
cient
Standard
error of
estimate
Conclusion about model
prepared
1 model: y
GDP
= 3482901 x
LA
+ 34 x
L
+ 3x
FC
+ x
GIEC
98.64% 3259.2
Coefficient of x
GIEC
is not
significant
2 model: y
GDP
= -991.33 0.003 x
LA
7.54 x
L
+ 9.607 x
FC
98.64% 8117.2
Coefficient of x
LA
is not
significant
3 model: y
GDP
= -2125.52 9.64 x
L
+ 8.88 x
FC
93.05% 8236.3
Coefficient of x
L
is not
significant
4 model: y
GDP
= -13062.6 + 8.3 x
FC
91.54% 8780.1
Model is adequate, when F
criteria is taken into
account
5 model: y
GDP
= 149631 +16 x
LA
+
+ x
FC
+ 128 x
IR
+ 20 x
NE
51 x
CO
+ 5 x
NG
+
+ 7 x
OP
74 x
NEX
99.78% 1699.2
Coefficients of x
LA
, x
FC
,
x
NG
are not significant
6 model: y
GDP
= 471869 0.2 x
LA
+ 14 x
L
+
+ 3.5 x
FC
+ 73.2 x
IR
1.9 x
NE
+ 10.5 x
NG
+ 5.9 x
OP
99.49% 2400.0
Some coefficients are not
significant
7 model: y
GDP
= 101064 + 10 x
L
+ 4 x
FC
+ 84 x
IR

2 x
NE
+ 13 x
NG
+ 7 x
OP
99.46% 2298.0
Some coefficients are not
significant
8 model: y
GDP
= 89810.5 + 3.7 x
FC
+ 82.6 x
IR

2.5 x
NE
+ 13.9 x
NG
+ 7.9 x
OP
99.46% 2196.0
Model is adequate, when F
criteria is taken into
account
9 model: y
I
= 57380.5 + 23.5 x
IR
+ 13.6 x
NG
+ 7.5 x
OP
85.72% 2961.0
Model is adequate, when F
criteria is taken into
account
10 model: y
C
= 62614.6 + 86.6 x
IR
3.6 x
NE
+
+ 8.6 x
NG
+6.6 x
OP

98.10% 2548.2
Model is adequate, when F
criteria is taken into
account
11 model: y
NX
= 30949.08 10.6 x
NG
4.53 x
OP
61.47% 2554.4
Model is adequate, when F
criteria is taken into
account

Table 1 has showed that various models of Lithuanian GDP could be prepared. Firstly, it has been
assumed that Lithuanian GDP might be influenced by use of agricultural land, people employed in economic
activities, consumption of fixed capital and consumption of gross inland energy consumption (model 1).
However, the results have told that the coefficient of gross inland energy consumption has not been
significant in the model. Thus, new variants of the regression models have been calculated.
As it is indicated in the model 4, consumption of fixed capital could adequately explain development
of Lithuanian GDP during 19952009. An increase of consumption of fixed capital by 1 million LTL could
improve Lithuanian GDP by 8.3 million LTL. Other factors that have not been included in the model have
reduced GDP by 13062.6 million LTL. Fixed capital consumption could explain 91.54% of development of
Lithuanian GDP.
Since gross inland energy consumption is not significant in the model 1, therefore it has been decided
to segregate gross energy by types of fuel and energy and to analyze the effect of energy consumption on
ISSN 1822-6515 ISSN 1822-6515
EKONOMIKA IR VADYBA: 2011. 16 ECONOMICS AND MANAGEMENT: 2011. 16


124
GDP at segregated level. Additional regression models 5, 6, 7 and 8 have been prepared (Table 1). The
results of the model 5 have showed that agricultural land, consumption of fixed capital, consumption of
indigenous resources, nuclear energy, natural gas and oil products have been positively related to Lithuanian
GDP, whereas consumption of coal and net electricity export has had an adverse effect on GDP. This has
showed that coal consuming country has losses in GDP and the amount of looses directly depends on volume
of coal consumed. Therefore it is valuable to shift fuel from coal to, for example, indigenous resources (such
as wood).
Consumption of coal and volume of net electricity export historically has made 1.9% and 3.6% of
gross inland energy consumption in Lithuania, respectively. Coal consumption and net electricity export
volumes during the analyzed period have been changing inconstantly, no clear direction of their development
has been found. As a result values of coefficients are difficult to explain; as well it is complicated to give
them economic sense. For further analysis it has been decided not to include these variables into the
regression models.
Model 6 has represented results of regression, when only sustainable fuels, fuels comprising a
dominant share of gross inland energy consumption, agricultural land, people employed and fixed capital
have been analyzed. Nonetheless some of calculated coefficients have not been significant in the model 6, as
well in model 7. Variables with the lowest t-statistics have been eliminated from these models.
Calculated model 8 has been statistically significant and adequate for the analysis of Lithuanian GDP
and its factors. This model has showed that fixed capital, indigenous resources, nuclear energy, natural gas
and oil products might explain development of Lithuanian GDP. It is worth noting that all variables, except
nuclear energy, have had a positive effect on GDP. The results of model 10 might explain a negative effect
of nuclear energy on GDP, i.e. a negative effect of nuclear energy on GDP has emerged through nuclear
energys ability to contribute to reduction of households consumption expenditure (see description of model
10 below). The results of the model 8 have represented that Lithuanian GDP is sensitive over consumption of
indigenous resources, including renewable energy sources, as well over consumption of natural gas. An
increase of indigenous resources by 1 ktoe might improve GDP by 82.6 million LTL and an increase of
natural gas by 1 ktoe could augment GDP by 13.9 million LTL.
As it is indicated in the model 9 the positive influence of indigenous resources, natural gas and oil
products has passed GDP through these variables positive effects on gross capital formation.
Results of the model 10 have represented that households consumption expenditure has been
dependent on volume of indigenous resources, nuclear energy, natural gas and oil products. It is interesting
to notice that both indigenous resources, the consumption of which is supported in Lithuania, use of natural
gas and oil products have increased households consumption expenditure, whereas consumption of
additional 1 ktoe of nuclear energy has reduced households consumption expenditure by 3.6 million LTL.
The reduction of households consumption expenditure due to increase of consumption of nuclear energy has
been possible, because fuel costs (variable costs) of such type of energy has been low and investments (fixed
costs) into Ignalina nuclear power plant have been already paid. Thus, in this respect nuclear energy has been
cheap.
Important results have been received in model 11. This model has presented that net exports of goods
and services have been influenced by consumption of natural gas and oil products. The higher the countrys
dependency on consumption of natural gas and oil products the worse volume of net exports of good and
services. The reasons for such an effect to emerge might be twofold. On the one hand, countrys export
competitiveness might be reduced regarding high consumption of mentioned fuels. Such a situation could be
explained by fact that historically natural gas price has been higher than the price of other fuels
(Konstantinaviit et al., 2010). In this case price of goods and services, an input of which natural gas is,
has increased and might reduce export competitiveness. On the other hand, natural gas has been imported.
Imports of goods and services has worsen a trade balance and hereby GDP.
Conclusions
With reference to regression analysis performed, the following conclusions might be drawn:
1. The analysis of the univariate relationships have showed that development of agricultural land,
consumption of fixed capital might well describe changes of GDP in Lithuania. Higher level of GDP could
be achieved by lowering the use of agricultural land. GDP might be improved by increasing consumption of
fixed capital. An increase of consumption of fixed capital by 1 million LTL could improve Lithuanian GDP
by 8.3 million LTL. Other factors that have not been included in the model have reduced GDP by 13062.6
ISSN 1822-6515 ISSN 1822-6515
EKONOMIKA IR VADYBA: 2011. 16 ECONOMICS AND MANAGEMENT: 2011. 16


125
million LTL. Fixed capital consumption might explain 91.54% of development of Lithuanian GDP. There
have been observed positive linkages between GDP, number of people employed, and gross inland energy
consumption, i.e. an increase of people employed by 1 thousand and consumption of gross inland energy by
1 ktoe might improve GDP by 7.99 million LTL and 7.66 million LTL, respectively. However, statistically
these relationships have not been found significant.
2. The analysis of univariate relationships between different types of fuel and energy and GDP have
disclosed that development of consumption of indigenous resources, natural gas, electricity and heat have
been closely related to changes of Lithuanian GDP. Mentioned types of energy and fuel might explain
92.9%, 52.78%, 58.55% and 56.74% of GDP development in Lithuania, respectively.
3. The results of multivariate regression model have showed that fixed capital, indigenous resources,
nuclear energy, natural gas and oil products might explain development of Lithuanian GDP. All variables,
except nuclear energy, have had a positive effect on GDP. A negative effect of nuclear energy on GDP has
appeared due to nuclear energys effect on households consumption expenditure, i.e. cheap nuclear energy
has enabled households to reduce their expenditure. Positive influence of indigenous resources, natural gas
and oil products has passed GDP through their positive effects on gross capital formation. Net exports of
goods and services have been influenced by consumption of natural gas and oil products. The higher the
countrys dependency on consumption of natural gas and oil products the worse volume of net exports of
good and services.
References
1. Abu-Bader, S., & Abu-Qarn, A. S. (2003). Government expenditures, military spending and economic growth:
causality evidence from Egypt, Israel, and Syria. Journal of Policy Modeling, 25(6-7), 567583.
2. Adjaye, J. A. (2000). The relationship between energy consumption, energy prices and economic growth: time
series evidence from Asian developing countries. Energy Economics, 22, 615625.
3. Akinlo, A. E. (2009). Energy consumption and economic growth: Evidence from 11 Sub-Sahara African countries.
Energy Economics, 30, 23912400.
4. Ang, J. B. (2008). What are the mechanisms linking financial development and economic growth in Malaysia?
Economic Modelling, 25(1), 3853.
5. Apergis, N., & Payne, J. E. (2009). Energy consumption and economic growth in Central America: Evidence from
a panel cointegration and error correction mode. Energy Economics, 31, 211216.
6. Apergis, N., Payne, J. E., & Wolde-Rufael, J. (2010). On the causal dynamics between emissions, nuclear energy,
renewable energy, and economic growth. Ecological Economics, 69, 22552260.
7. Bliekien, R., Boguslauskas, V., & Valanien, L. (2006). Ekonometrika: Praktiniai darbai. Mokomoji knyga.
Kaunas, Technologija, 2006.
8. Boguslauskas, V. (2004). Ekonometrikos pagrindai. Kaunas, Technologija, 2004.
9. Chen, T., Kuo, H., & Chen, Ch. Ch. (2007). The relationship between GDP and electricity consumption in 10 Asian
countries. Energy Policy, 35, 26112621.
10. Chien, T., & Hu, J. (2008). Renewable energy: An efficient mechanism to improve GDP. Energy Policy, 36, 3045
3052.
11. Christiaans, Th. (2008). International trade and industrialization in a non-scale model of economic growth.
Structural Change and Economic Dynamics, 19(3), 221236.
12. Dutt, A. K., & Ros, J. (2007). Aggregate demand shocks and economic growth. Structural Change and Economic
Dynamics, 18(1), 7599.
13. Hassan, M. K., Sanchez, B., & Suk Yu, J. (2011). Financial development and economic growth: New evidence
from panel data. The Quarterly Review of Economics and Finance, 51(1), 88104.
14. Herranz-Loncn, A. (2007). Infrastructure investment and Spanish economic growth, 18501935. Explorations in
Economic History, 44(3), 452468.
15. Hsiao, F. S. T., & Hsiao, M. Ch. W. (2006). FDI, exports, and GDP in East and Southeast AsiaPanel data versus
time-series causality analyses. Journal of Asian Economics, 17(6), 10821106.
16. Hung, F. Sh. (2003). Inflation, financial development, and economic growth. International Review of Economics &
Finance, 12(1), 4567.
17. Kaneko, A. (2000). Terms of trade, economic growth, and trade patterns: a small open-economy case. Journal of
International Economics, 52(1), 169181.
ISSN 1822-6515 ISSN 1822-6515
EKONOMIKA IR VADYBA: 2011. 16 ECONOMICS AND MANAGEMENT: 2011. 16


126
18. Karazijiene, Z. (2009). Modelling of the effect of the Public Sector Borrowing on the Lithuanian Economy.
Inzinerine Ekonomika-Engineering Economics(4), 2431.
19. Katinas, V., & Markevicius, A. (2006). Promotional policy and perspectives of usage renewable energy in
Lithuania. Energy Policy, 34(7), 771780.
20. Katinas, V., Markevicius, A., & Kavaliauskas, A. (2007). Current status and prospects of biomass resources for
energy production in Lithuania. Renewable Energy, 32(5), 884894.
21. Kilijoniene, A., Simanaviciene, Z., & Simanavicius, A. (2010). The Evaluation of Social and Economic
Development of the Region. Inzinerine Ekonomika-Engineering Economics, 21(1), 6879.
22. Klevas, V., Streimikiene, D., & Grikstaite, R. (2007). Sustainable energy in Baltic States. Energy Policy, 35(1), 76
90.
23. Konstantinaviit, I., Tarvydas, D., & Bobinait V. (2010). Analysis of possible support measures for RES-H in
Lithuania. Proceedings of the 5
th
International Conference on Electrical and Control Technologies, 279284.
24. Laktutien, A. (2009). Correlation of the Indicators of the Financial system and Gross Domestic Product.
Inzinerine Ekonomika-Engineering Economics, 3(58), 718.
25. Lapinskien, G., & Peleckis, K. (2009). Darnaus vystymosi rodikli poveikis ekonominiam augimui: Baltijos alys
isivysiusios Europos kontekste. Verslas: teorija ir praktika, 10(2), 107117.
26. Lapinskien, G., & Tvaronaviien, M. (2009). Darnusis vystymasis Centrinje ir Ryt Europoje: pagrindiniai
ekonominio augimo aspektai. Verslas: teorija ir praktika, 10(3), 204213.
27. Lee, Ch. Ch, & Chiu, Y. B. (2011). Nuclear energy consumption, oil prices, and economic growth: Evidence from
highly industrialized countries. Energy Economics, 33(2), 236248.
28. Lee, Ch. Ch., & Chang, Ch. P. (2007). The impact of energy consumption on economic growth: Evidence from
linear and nonlinear models in Taiwan. Energy, 32(12), 22822294.
29. Lee, J. (2011). Export specialization and economic growth around the world. Economic Systems, 35(1), 45-63.
30. Lithuanian Statistics Department database // www.stat.gov.lt.
31. Mahadevan, R., & Asafu-Adjaye, J. (2007). Energy consumption, economic growth and prices: A reassessment
using panel VECM for developed and developing countries. Energy Policy, 35, 24812490.
32. Martinkus, B., Stoskus, S., & Berzinskiene, D. (2009). Changes of Employment through the Segmentation of
Labour Market in the Baltic States. Inzinerine Ekonomika-Engineering Economics(3), 13922785.
33. Miskinis, V., Slihta, G., & Rudi, Y. (2006). Bio-energy in the Baltic States: Current policy and future development.
Energy Policy, 34(18), 39533964.
34. Narayan, P. K., & Smyth, R. (2008). Energy consumption and real GDP in G7 countries: New evidence from panel
cointegration with structural breaks. Energy Economics, 30, 23312341.
35. National Land Service (2010). Fund of Land in Lithuanian Republic in 1 January 2010 // www.nzt.lt
36. Ozturk, I., & Acaravci, A. (2010). The causal relationship between energy consumption and GDP in Albania,
Bulgaria, Hungary and Romania: Evidence from ARDL bound testing approach. Applied Energy, 87, 19381943.
37. Roa, M. J., Saura, D., & Vzquez, F. J. (2011). Economic growth, labor market and demographic patterns.
Structural Change and Economic Dynamics, 22(1), 81-91.
38. Saboniene, A. (2009). Lithuanian Export Competitiveness: Comparison with other Baltic States. Inzinerine
Ekonomika-Engineering Economics(2), 4957.
39. ekut, L., & Tvaronaviius, V. (2007). Tiesiogini usienio investicij Baltijos alyse tyrimas. Verslas: teorija ir
praktika, 8(3), 153160.
40. Sharma, S.S. (2010). The relationship between energy and economic growth: Empirical evidence from 66
countries. Applied Energy, 87(11), 35653574.
41. Snieska, V., & Simkunaite, I. (2009). Socio-Economic Impact of Infrastructure Investments. Inzinerine
Ekonomika-Engineering Economics(3), 1625.
42. Streimikiene, D. (2007). Monitoring of energy supply sustainability in the Baltic Sea region. Energy Policy, 35(3),
16581674.
43. Streimikiene, D. (2008). The role of nuclear energy in Lithuania under various post-Kyoto climate change
mitigation regimes. Energy, 33(7), 10051014.
44. Valdovinos, C. G. F. (2003). Inflation and economic growth in the long run
Economics Letters, 80(2), 167173.
45. Wei, Z., & Hao, R. (2010). Demographic structure and economic growth: Evidence from China. Journal of
Comparative Economics, 38(4), 472491.
46. Wu, Sh. Y., Tang, J. H., & Lin, E. S. (2010). The impact of government expenditure on economic growth: How
sensitive to the level of development? Journal of Policy Modeling, 32(6), 804817.
47. Yanikkaya, H. (2003). Trade openness and economic growth: a cross-country empirical investigation. Journal of
Development Economics, 72(1), 5789.
48. Zilinske, A. (2010). Incoming investments: holly water or menu of potential troubles? Inzinerine Ekonomika-
Engineering Economics, 21(5), 518524.