Answer to Question #271578 in Macroeconomics for Maphula

Question

The estimated regression of Y on X1, X2, and X3 using a sample of 30 observations, 

gave the following results:

Yt = 2.4 + 3.9X1 + 0.65X2 – 1.46X3

(1.0)

(1.50 (0.40) (0.61)

Adjusted R2 = 0.67

Figures in parenthesis are standard errors of estimates.

a) Asses the statistical quality of the model.

b) Interpret the estimates and explain which variables are significant and which 

variables are not?

Answer 1

LET'S PRESENT THE SOLUTION IN ExceL

The coefficient of determination for the model with a constant takes values ​​from 0 to 1. The closer the coefficient value to 1, the stronger the dependence. When evaluating regression models, this is interpreted as fitting the model to the data. For acceptable models, it is assumed that the coefficient of determination should be at least at least 50% (in this case, the multiple correlation coefficient exceeds 70% in modulus). Models with a coefficient of determination above 80% can be considered quite good (the correlation coefficient exceeds 90%). The value of the coefficient of determination 1 means the functional relationship between the variables.

According to the presented R2, the model is acceptable.

According to the covariance matrix, the greatest connection with x1 and x3.