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Applied statistics

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Table 1 suggests that all regressor variables of the regression, except for LFDI and LG are significant at the 0. This means that for all coefficients, except LFDI and LG, we can reject the applicable null hypothesis that i =0 to accept alternative hypotheses that are consistent with economic theory. Based on the theory of the national income function in economics, we expect the signs to be as follows: 2>0, 3>0, 4>0, 5>0, 6>0, and 7<0. Table 1 indicates that model 1 have coefficients that are consistent with the economic theory of national income except for LFDI and LG.Model 1 has the explanatory power of explaining 99.99% of the variations of the dependent variable logarithm of gross domestic product or LGDP. Based on the link between the F-statistics and R2 discussed in Gujarati 2004: 258, we can reject the null hypothesis the coefficients of the regression are simultaneous equal to zero to accept the alternative hypothesis that not all of the coefficients are zero. Thus, following Gujarati 2004:258, the F-test is also a test of significance of the R2, rejecting the null hypothesis of the F-test allow us to reject the null hypothesis Ho: R2 = 0 to accept the alternative hypothesis HA: R2 > 0.We develop model 2 by removing LFDI or the logarithm of foreign direct investment from the regression. The non-significance of LFDI indicates that LFDI is not significantly affecting LGDP or the logarithm of gross domestic product. It indicates that it is LDI or domestic investments that is significantly affecting LGDP not LFDI. Again, we used Eviews to determine the empirical implementation of model 2 below.Similarly, we obtained Table 2 above as the empirical implementation of model 2. Based on the figures of Table 2, model 2 appears to be the better econometric model. Although the F and R2 of model 1 are as good as model 2, model 2 has a lower standard error of regression and can be described as more accurate than model 1. As in model 1, model 2 allows us to reject the null hypothesis that the coefficients are simultaneously equal to zero based on the F-statistics. It also allows us to reject the null hypothesis that R2 is equal to zero and accept that alternative hypothesis that R2 is greater than zero. Further, except for LG, the coefficients have signs consistent with the economic theory on national income. Except for LG and the constant, the
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preview essay on Applied statistics
  • Pages: 4 (1000 words)
  • Document Type: Essay
  • Subject: Unsorted
  • Level: Undergraduate
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