I ran a regression equation of Unemployment Rate c GDP Growth in EViews and got
ID: 3395395 • Letter: I
Question
I ran a regression equation of Unemployment Rate c GDP Growth in EViews and got
Coeffecient -0.284697
Standard Error 0.345905
Probability 0.4168
R^2 0.015801
Adjusted R^2 -0.015947
1) What is the Standard Error telling me about GDP Growth's relationship to the Unemployment Rate?
2) Actually if I could get a rundown of what each of these results say about GDP Growth's relationship to Unemployment Rate that would be GREAT. But the one I need the most and still don't quite understand is the Standard Error so please help me with that one.
Explanation / Answer
Let regression equation be Y = a + b*X
The coefficient for the explanatory variable X = -0.285697
This means that your regression equation looks like:
Y = a - 0.284697*X
Change in X by +1 unit will lead to chenge in Y by -0.284697 units on an average.
Standard error is the standard deviation of the estimator for b. -0.284697 is an estimate for b, and b has a standard deviation of 0.345905.
To test the hypothesis that the relation between Y and X is significant or not (b=0 or not),
test statistic = coefficient / standard error = -0.284697 / 0.345905 = -0.823
Probability = P-Value = 2*P(tn-2 <-0.823) = 0.4168
As P-Value > 0.05, we accept the null hypothesis that b=0, hence the relation between Y and X is not significant.
R^2 = 0.015801 = 1.5801% is the percetage of variation in Y explained by X, which is pretty low for this model.