NORTH SOUTH UNIVERSITY

School of Business
(MBA Program)
Course code: BUS 511
Project Name:
Prepared for:
Kais Zaman, Ph.D.
Prepared by:
Name ID
Rakibul Islam Khan 1331040660
Md. Joheb Rashid 1331277660
Afzal Hossain 1330541660
Introduction
In our project we have tried to investigate the relationship
between electricity consumption and GDP
Electricity Consumption GDP (Gross Domestic Product)
GDP (Gross Domestic Product)
GDP represents the total dollar value of goods
and services produced over a specific time
period

It is a good indicator of a health of a countrys
economy
GDP cannot be found by simply counting
products and services
It depends on many other factors
So if the factors that affects GDP also affects
electricity consumption in Bangladesh, only
then it will be reasonable to compute a
relationship between GDP and Electricity
Consumption in Bangladesh
GDP (Gross Domestic Product)
Past Research
Effect of Different Factors on Gross Domestic
Product: A Comparative Study of Pakistan and
Bangladesh




By: Shafaqat Mehmood

Published in: Academy of Contemporary Research
Journal
V I (I), 11-22, ISSN: 2305-865X
GDP
GDP is usually calculated using the following
equation


GDP =
Consumption
Expenditure
Investment Gov. Spending (Export Import) + +
+
Our Investigation
Find the relationship between
Electricity Consumption and GDP in
Bangladesh

By Investigating how the factors
affecting GDP affects Electricity
Consumption in Bangladesh
Objective
To find the relationship between Electricity Consumption and
Consumption Expenditure of Bangladesh
To find the relationship between Electricity Consumption and
Investment in Bangladesh
To find the relationship between Electricity Consumption and
Government Spending in Bangladesh
To find the relationship between Electricity Consumption and Net
Exports of Bangladesh
To develop a model by regression analysis of the independent
variables with the dependent variables
To test the usefulness of the model
To test correlation co-efficient
Determine the relation between GDP and Electricity Consumption
in Bangladesh
Research Methodology
Data Collection
All the data used in this paper have been
collected from secondary source

www.tradingeconomics.com
www.indexmundi.com

Variables
Dependent Variable

As we are trying to mind how factors affecting
GDP affects Electricity consumption

Electricity Consumption is the Dependent
Variable

Variables
Independent Variables

Consumption Expenditure
Investment
Gov. Spending
Net Exports (Export-Import)

Method
Regression Model
Correlation Analysis
Hypothesis Test (Correlation)
Hypothesis Test to see any set of regression coefficients differ
from zero
Test the Effectiveness of the model using Analysis of Variance
Test (ANOVA)
If the factors affect electricity consumption the we will determine
regression equation between GDP an Electricity Consumption
Correlation Analysis
Consumption
Expenditure
Investment
Gov.
Spendin
g
Net
Expo
rt
Electricity
Consumption

Consumption
Expenditure

1
Investment

- 1
Gov. Spending

- - 1
Net Export

- - - 1
Electricity
Consumption
- - - - 1
Hypothesis Test (Correlation)
T-test was used for testing whether the
correlation was zero or not
Significance level of 2% was taken
Therefore the critical value = 2.462

H
0
: r = 0 (There exists no correlation)
H
1
: r 0 (Correlation exists)
T
cal
= r( n-2) / (1 r
2
)
Null Hypothesis was rejected if calculated t
value was more than 2.462 or less than -2.462

Regression Model
A multiple regression equation was drawn as
follows
Y =
0
+
1
C +
2
I +
3
S +
4
N

Here

C = Consumption Expenditure
I = Investment
S = Gov. Spending
N = Net Export (Export-Import)
Global Test
Global test is done to investigate whether the
variables have significant coefficients or not

H
0
: b
1
= b
2
= b
3
= b
4
= 0(Factors had no impact)
H
1
: Not all b is 0 (Factors had an impact)

ANOVA table is constructed and F distribution
is used to test the hypothesis



ANOVA Table
ANOVA TABLE
Source df SS MS F
Regression k SSR
(Y-Y)
2
MST
=SSR/(k)
MST/MSE
Error n-k-1 SSE
(Y-Y)
2
MSE=
SSE/(n-k-1)
Total n-1 SS Total
(Y-Y)
2
If p-value is less than 0.02, then Null hypothesis is
rejected
Not all the coefficients are zero
Hypothesis Test
Then hypothesis test was done to find
whether the factors had any impact on
Electricity Consumption or not

H
0
: b
x
= 0 (Factors had no impact)
H
1
: b
x
0 (Factors had an impact)


Hypothesis Test (Correlation)
T-test was used for testing whether the
correlation was zero or not
Significance level of 2% was taken

H
0
: b
x
= 0 (Factors had no impact)
H
1
: b
x
0 (Factors had an impact))
Then the p-value was determined using
minitab
If the p-value is less than 0.02 the null
hypothesis is rejected. The factor has an
impact.

Improved Regression Model
Improved Equation was developed

Using the variables which had an
impact on Electricity Consumption

Removing the variables which did not
affect the electricity consumption
Regression Model
A regression equation was drawn as follows
Y = a + bX

Here

Y = Electricity Consumption
X = GDP
Calculations and Results
Scattered Graphs
Correlation Analysis
Consumption
Expenditure
Investment
Gov.
Spending
Net
Export
Electricity
Consumption

Consumption
Expenditure

1
Investment

0.975 1
Gov. Spending

0.984 0.964 1
Net Export

-0.917 -0.930 -0.947 1
Electricity
Consumption
0.960 0.929 0.959 -0.917 1
Hypothesis Test (Correlation)

H
0
: r = 0 (There exists no correlation between Electricity
Consumption and Consumption Expenditure of Bangladesh)
H
1
: r 0 (Correlation between Electricity Consumption and
Consumption Expenditure of Bangladesh exists)

Critical Value = 2.462
Calculated t value = 18.463

The calculated t value is more than critical value. So Null
Hypothesis is rejected. There is a correlation Electricity
Consumption and Consumption Expenditure of Bangladesh
exists
Hypothesis Test (Correlation)
Hypothesis Test
(Correlation between
Electricity
consumption and)
Critical
Value
Calculated
t value
Remarks decision
Consumption
Expenditure
2.462 18.463 Calculated t is
more than
critical value
H
0
Rejected
Correlation
Exists
Investment 2.462 13.518 Calculated t is
more
H
0
Rejected
Correlation
Exists
Gov. Spending 2.462 18.225 Calculated t is
more
H
0
Rejected
Correlation
Exists
Net Export 2.462 -12.380 Calculated t is
less than
critical value
H
0
Rejected
Correlation
Exists
Regression Model
Using minitab the following regression model
was determined
The regression equation is

Electricity Consumption (MWh) = - 2108400 + 337550 Consumption (Billion USD)
- 338142 Investment (Billion USD)
+ 38878 Gov. Spending (Billion USD)
- 113287 Net Export (Billion USD)







Y = -2108400 + 337550 C 338242 I + 38878 S 113287 N

Hypothesis Test
Then we tested whether the coefficients had
any impact on determining electricity
consumption or not

In other words, we tested whether the
coefficients differed from zero or not
Hypothesis Test
Predictor Coef SE Coef T P
Constant -2108400 2738182 -0.77 0.447
Consumption (Billion USD) 337550 94025 3.59 0.001
Investment (Billion USD) -338142 126597 -2.67 0.013
Gov. Spending (Billion USD) 38878 13584 2.86 0.008
Net Export (Billion USD) -113287 74531 - 1.52 0.141
In every factor except Net Export, the p-value is less than 0.02.
So null hypothesis was rejected.
The coefficients are not zero and so has an impact on Electricity
Consumption calculation
The p-value incase of Net Export was more than 0.02, so null
hypothesis was not rejected. Net Export does not impact
electricity consumption
Improved Equation
An Improved equation was developed by
removing the Net Export factor.
The regression equation is

Electricity Consumption (MWh) = - 2144545 + 341985 Consumption (Billion USD)
- 332474 Investment (Billion USD)
+ 39964 Gov. Spending (Billion USD)
Y = -2144545 + 341985 C 332474 I + 39964 S

Adequacy of Model
Correlation (r)= 0.929
It means there is a strong relationship
between the variables

Coefficients of Determination (r
2
) = 0.922
It indicates 92.2% of the variability in the
dependent variable can be explained by
variability in independent variable.
ANOVA Table
Analysis of Variance

Source DF SS MS F P
Regression 3 4.79303E+15 1.59768E+15 118.49 0.000
Residual Error 27 3.64045E+14 1.34831E+13
Total 30 5.15708E+15

The p-value is less than 0.02 which again indicates that not
all b values are zero

The factor whose coefficient was zero was not considered
when improving the equation

This is an adequate model.

3 of the 4 factors that affect
GDP also affects Electricity
consumption in Bangladesh

So the factors that governs GDP
also governs Electricity
consumption in Bangladesh

So it is reasonable to form a
equation between GDP and
Electricity Consumption in
Bangladesh

Building Relation
Pearson correlation of Electricity Consumption (MWh) and GDP (Billion USD)
= 0.986

P-Value = 0.000
Building Relation
Regression Analysis: Electricity Cons versus GDP (Billion USD

The regression equation is
Electricity Consumption (MWh) = - 2920123 + 146410 GDP (Billion USD)


Predictor Coef SE Coef T P
Constant -2920123 717650 -4.07 0.000
GDP (Billion USD) 146410 4559 32.11 0.000


S = 2205372 R-Sq = 97.3% R-Sq(adj) = 97.2%


Analysis of Variance

Source DF SS MS F P
Regression 1 5.01603E+15 5.01603E+15 1031.33 0.000
Residual Error 29 1.41046E+14 4.86367E+12
Total 30 5.15708E+15

Summary
There is positive correlation between
Electricity Consumption and Consumption
Expenditure
Electricity Consumption and Investment
Electricity Consumption and
Government Spending
So there is relationship between
GDP and Electricity Consumption
Relationship between GDP and Electricity
Consumption in Bangladesh
Electricity Consumption (MWh) =
- 2920123 + 146410 GDP (Billion USD)