A study of a microfinance program in South India estimated the following least squares regression:

where Y = monthly family income, X₁ = years in the microfinance loan program, and X₂ = total amount loaned. The standard errors are in parentheses, the t values are in brackets, and R₂ = 0.05.

a. Is the coefficient of X₂ substantial?

b. How was the t value for the coefficient of X₂ calculated?

c. How would you decide whether to calculate a one-sided or two-sided P value for the coefficient of X₂?

d. Explain why you either agree or disagree with this interpretation of the results:
“The one-sided P value for the total amount loaned is 0.032, which is not quite high enough to show that the amount loaned is statistically significant at the 5 percent level.”

Transcribed Image Text:

Y 1.711.40+ 11.27X+0.0316X2 (265.86) (43.01) [6.44] (0.0168) [0.26] [1.88]