Research Methods Coursework Example | Topics and Well Written Essays - 1500 words

Research Methods - Coursework Example Since the alternative is of non-equality, the rejection zones will be in both ends of the distribution. Therefore the test will be two tailed. The p-value is 0.01070 using a significance level of 0.05 The alternative hypothesis is that the true coefficient is positive. So the rejection zone is on the right tail of the distribution and thus the test is right tailed. The computed t-value is 2.598522> 1.682 = the critical one sided 5% t value. Therefore, we reject the null hypothesis at 5% level of significance. Therefore, the test provides evidence of the fact that secondary enrollment has a significant positive impact on the growth of GDP. H0:?7=0 H1:?7>0 using a significance level of 0.1 Similar to the test conducted above, the alternative hypothesis is that the coefficient is positive. Therefore, the test will be right tailed once more. The computed t-value =1.50471< 2.418 = the critical 1% t-value. So, we fail to reject the null hypothesis at the 1% level. This implies there is no evidence of private credit ratio having any observable impact on the dependent variable, growth of GDP. Evidently a contradiction arises between the conclusions obtained in (i) and (ii). In (i), the test fails to reject the null hypothesis that all the coefficients are jointly zero. But in (ii), the null hypothesis that the coefficient on the 1990 percapita GDP is zero is rejected. So, (ii) accepts the hypothesis (null in (ii), alternative in (i)) that is rejected by (i). To reconcile between these contradictions, it should be noted that tests of joint significance may fail to reject the null of joint insignificance if majority of the explanatory variables included are found to be insignificant. Usually, such cases arise if the basic assumptions of OLS are violated. Certainly if the presence of outliers skews the distribution of errors, such contradictions should be anticipated. 3. Primary recommendation for the finance minister on the basis of results From the results of the OLS mo del in part 1, we find that the coefficient on secondary enrolment as well as private credit ratio is positive. The coefficient for secondary enrolment is 0.254 and that for private credit ratio is 0.212. Thus, these are quite close to one another although that for private credit ratio is slightly lower. But critically, it should be noted that only the coefficient of secondary enrolment is statistically significant. So, only secondary enrolment among our variables of interest seems to have any effect on growth of GDP. There is no evidence that private credit has any impact on growth GDP. Thus my recommendation will be to invest the entire sum of $2 Billion on the policy measures that will increase the country’s rate of enrolment in secondary education. 4. Diagnostics This section will evaluate the validity of the standard assumptions of