econometrics (Page 361)

# econometrics (Page 361)

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but unknown β2, whereas in the test-of-significance approach we hypothesize some value for β2 and try to see whether the computed ˆ β2 lies within reasonable (confidence) limits around the hypothesized value. Once again let us revert to our consumption–income example. We know that ˆ β2=0.5091, se (ˆ β2)=0.0357, and df=8. If we assume α=5 percent, tα/2=2.306. If we let H0:β2=β * 2=0.3andH1:β2=0.3, (5.7.2) becomes Pr (0.2177≤ˆ β2≤0.3823)=0.95 (5.7.3)

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