I ran a regression equation of Unemployment Rate c GDP Growt

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.

Solution

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(t_n-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.