3-25-09 - A one percentage point rise in the interest rate...

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Economic Statistics – Class Notes – 3/25/09 We can draw a line to fit any set of data, but the question is, is that line a “good” fit? RECALL: There is a gap between the actual value of Y and the predicted value of Y. Yi = actual Y value when X = Xi Yi = Predicted value of Yi when X = Xi Ybar = mean of Y
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SST = The sum of squared total deviation of Y from its mean SSE = The sum of squared error Y from the regression line the unexplained sum of squares SSR = The sum of squared regression the explained sum of squares 1. The Coefficient of Determination R 2 (Correlation coefficient) 2 Given: SST = SSE + SSR The fraction of the sum of squared deviations of Y from its mean that is explained = (R 2 )
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WORKSHEET (IN-CLASS) When the interest rate is zero Investment IS EXPECTED TO equal $2932 billion IS EXPECTED TO Statistical significance because this is a sample. There will be different numbers for a different sample.
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Unformatted text preview: A one percentage point rise in the interest rate is expected to cause investment to decline by $226.64 billion. (This is a percentage) WATCH YOUR UNITS WHEN YOU MAKE YOUR INTERPRETATION For exam next Friday BE CAREFUL ABOUT YOUR INTERPRETATIONS! - A 1% rise in investment is expected to cause the interest rate to fall by 226 BE CAREFUL OF REVERSE CAUSALITY You always start with the independent variable (R) having an effect on the dependent variable (I). INTERPRETATION: Thus, we have a 90% level of confidence that the true slope coefficient lies between (-161.94 and -291.34) THAT IS, in repeated sampling , 90% of all intervals so constructed will contain USE THIS INFORMATION TO FILL IN THE BLANKS ON THE WORKSHEET Since the value of the test statistic falls in the critical region, we reject H0....
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This note was uploaded on 06/03/2009 for the course ECON 203 taught by Professor Casler during the Spring '09 term at Allegheny.

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3-25-09 - A one percentage point rise in the interest rate...

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