Relative Importance of Openness Index and Crude Oil Price in Explaining Growth of India's GDP During 1970-71 to 2019-20

Abstract

This paper seeks to evaluate the relative  importance of the Openness Index (OPI) and Crude Oil  Price (COP) to explain the growth of the GDP of India in  the period from 1970-71 to 2019-20. For this purpose,  this study uses a very popular and important method of  evaluating the relative importance of predictors in the  context of linear multiple regression analysis, viz.,  Budescu’s Average Dominance (BAD) method (Budescu  [1]. This study observes that two aspects of  multicollinearity, viz., enhancement-synergism (ES) and  change-in-sign (CS), not properly addressed in the  existing literature, though observed in the majority of  illustrations, are also not well taken by the above method.  As a result, mainly for the second aspect, BAD methods  lead to an improper evaluation of their relative  importance. Under these circumstances, this study  proposes a new method for evaluating True Relative  Importance (TRI) of the predictors that is also able to  assign their role. Using this new method this paper makes  the concluding observation that openness index is more  important and significant factor stimulating growth than  crude oil price.