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Basic Econometrics
23
Haleema Sadia
5.6 HYPOTHESIS TESTING:
THE CONFIDENCE-INTERVAL APPROACH
• → two-sided test
• → one-sided test
• is the value of β2 under H0 and where −tα/2 and tα/2 are the
values of t (the critical t values) obtained from the t table for (α/2)
level of significance and n − 2 df.
the critical region. In this case the null hypothesis is rejected. By the
the test statistic lies in the acceptance region. In this situation, the null
• To test this hypothesis, we use the one-tail test (the right tail),
as shown in Figure 5.5.
• The test procedure is the same as before except that the upper
confidence limit or critical value now corresponds to tα = t0.05,
that is, the 5 percent level. As Figure 5.5 shows, we need not
consider the lower tail of the t distribution in this case.
• CI = (- ∞, 0.3664)
In Eq. (5.11.1) the figures in the first set of parentheses are the estimated
standard errors of the regression coefficients, the figures in the second set are
estimated t values computed from (5.3.2) under the null hypothesis that the
true population value of each regression coefficient individually is zero (e.g.,
3.8128 = 24.4545 ÷ 6.4138), and the figures in the third set are the estimated p
values. Thus, for 8 df the probability of obtaining a t value of 3.8128 or greater is
0.0026 and the probability of obtaining a t value of 14.2605 or larger is about
0.0000003.
Note: For practice, please read carefully the wages-education example on page
129 as well.