Question

In this exercise, you will investigate the relationship between growth and trade. The following table contains data on average growth rates from 1960 through 1995 for 20 countries along with variables that are potentially related to growth. Download the data from the table by clicking the download table icon . A detailed description of the variables used in the data set is available here . Use a statistical package of your choice to answer the following questions. Run a regression of Growth on Trade Share. Test the null hypothesis Ho:B1 = 0 versus a two-sided alternative hypothesis Hj: B170. Compute the t-statistic and p-value. The t-statistic is (Round your response to three decimal places)

Answer 1

The regression model is Growth on TradeShare.

The OLS regression result as estimated in excel is:

SUMMARY OUTPUT
Regression Statistics
Multiple R	0.211499042
R Square	0.044731845
Adjusted R Square	0.029324294
Standard Error	1.789139868
Observations	64
ANOVA
	df	SS	MS	F	Significance F
Regression	1	9.293339116	9.293339116	2.903241733	0.093409233
Residual	62	198.463331	3.201021468
Total	63	207.7566701
	Coefficients	Standard Error	t Stat	P-value	Lower 95%	Upper 95%	Lower 95.0%	Upper 95.0%
Intercept	0.961546419	0.5802784	1.657043272	0.102563148	-0.198413575	2.121506412	-0.198413575	2.121506412
Share	1.6820837	0.987201947	1.703890176	0.093409233	-0.291304874	3.655472274	-0.291304874	3.655472274

Thus, the regression equation is:

Predicted Growth = 0.961546418646467 + 1.68208369991324*Share

Null hypothesis: B1 = 0

Alternate Hypothesis : B1 <> 0

Conduct the t-test

The t-statistic as observed in the table above for the regression coefficient of Share is 1.70389017645379

Rounded to 3 decimal places, the t-statistic is 1.704

The actual p-value is 0.0934092325182143

At 10% level of significance, the critical p-value is 0.10

Since, the actual p-value is 0.0934092325182143 < 0.10, the null hypothesis is rejected.

Yes, the estimated coefficient is significant statistically.

Null Hypothesis is rejected and Alternate Hypothesis is accepted at 10% level of significance.