A graduate student at the University of Jamaica is conducting a work on the labo

Question

A graduate student at the University of Jamaica is conducting a work on the labour the market for a Caribbean state. She amassed data on consumer price indices, and unemployment rates. She used wage growth as her dependent variable and, inflation (percent change in cpi) and unemployment rates as her independent or predictor variables.   Using OLS she generated the following table below:

                                                Model 6: OLS, using observations 1969-2005 (N=37)

                                                Dependent variable: wggr

                                Coefficient                          Std. Error                             t-ratio                   p-value

Constant              3.28323                                 1.0346                                   3.1734                   0.00319                 ***

Inflation               0.451285                              0.080067                              5.6363                   <0.00001              ***

Unemployment -0.126843                             0.169465                              -0.7485                 0.45931

Mean dependent var          4.605405                         S.Ddependent var                            1.976381

Sum squared resid                72.21495                        S.E of regression                               1.457384

R-squared                                 0.486449                        Adjusted R-Squared                        0.456240

F(2, 34)                                       16.10286                        P-value(F)                                           0.000012

Log-liklihood                            -64.87222                      Akaike criterion                                 135.7444

Schwartz criterion                  140.5772                        Hannan-Quinn                                  137.4482

Rho                                             0.388772                       Durbin-Watson                                 1.162512                             

(a) Write down the general linear form of the function used to forecast wage growth.           

(b) What is the OLS Regression Model estimate?   

(c) Is the Model statistically significant? Prove your answer.  

(d) Conduct individual t-tests to determine which independent variables have significant explanatory power.           

(e) How is the correlation matrix used in the analysis of the regression model?

(f) Is there evidence of serial correlation in the model?   

Explanation / Answer

a) wggr = b0 + b1*inflaiton + b1*unempolyment b) wggr = 3.28323 + .451285*inflaiton - 0.126843*unempolyment c) ho: model is not significant h1: model is significant with p-value = 0.000012 which is less than alpha (0.05) I reject ho at 5% level of signifiance and conclude that model is significant d) hoi: coefficient_i is not significant h1i: coefficient_i is significant I = 1,2 with p-value < .05, I reject ho1 and ho2 at 5% level of significance and conclude that coefficient of infaltiona dn unemployment is significant

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