In the Multiple Regression Model with Two Explanatory Variables
Y_{i $\bar { Z }$}

question 4

Essay

In the multiple regression model with two explanatory variables
Y_i = ?₀ + ?₁X_1i + ?₂X_2i + u_i
the OLS estimators for the three parameters are as follows (small letters refer to deviations from means as in z_i = Z_i - $\bar { Z }$ ): $$\hat { \beta } _ { 0 } = \bar { Y } - \hat { \beta } _ { 1 } \bar { X } _ { 1 } - \hat { \beta } _ { 2 } \bar { X } _ { 2 }$$ $$\hat { \beta } _ { 1 } = \frac { \sum _ { i = 1 } ^ { n } y _ { i } x _ { 1 i } \sum _ { i = 1 } ^ { n } x _ { 2 i } ^ { 2 } - \sum _ { i = 1 } ^ { n } y _ { i } x _ { 2 i } \sum _ { i = 1 } ^ { n } x _ { 1 i } x _ { 2 i } } { \sum _ { i = 1 } ^ { n } x _ { 1 i } ^ { 2 } \sum _ { i = 1 } ^ { n } x _ { 2 i } ^ { 2 } - \left( \sum _ { i = 1 } ^ { n } x _ { 1 i } x _ { 2 i } \right) ^ { 2 } }$$ $$\hat { \beta } _ { 2 } = \frac { \sum _ { i = 1 } ^ { n } y _ { i } x _ { 1 i } \sum _ { i = 1 } ^ { n } x _ { 1 i } ^ { 2 } - \sum _ { i = 1 } ^ { n } y _ { i } x _ { 1 i } \sum _ { i = 1 } ^ { n } x _ { 1 i } x _ { 2 i } } { \sum _ { i = 1 } ^ { n } x _ { 1 i } ^ { 2 } \sum _ { i = 1 } ^ { n } x _ { 2 i } ^ { 2 } - \left( \sum _ { i = 1 } ^ { n } x _ { 1 i } x _ { 2 i } \right) ^ { 2 } }$$ You have collected data for 104 countries of the world from the Penn World Tables and want to estimate the effect of the population growth rate (X_1i)and the saving rate (X_2i)(average investment share of GDP from 1980 to 1990)on GDP per worker (relative to the U.S.)in 1990. The various sums needed to calculate the OLS estimates are given below: $$\sum _ { i = 1 } ^ { n } Y _ { i }$$ = 33.33; $\sum _ { i = 1 } ^ { n } X _ { 1 i }$ = 2.025; $\sum _ { i = 1 } ^ { n } X _ { 2 i }$ =17.313 $\sum _ { i = 1 } ^ { n } y _ { i } ^ { 2 }$ = 8.3103; $\sum _ { i = 1 } ^ { n } x _ { 1 i } ^ { 2 }$ = .0122; $\sum _ { i = 1 } ^ { n } x _ { 2 i } ^ { 2 }$ = 0.6422 $\sum _ { i = 1 } ^ { n } y _ { i } x _ { 1 i }$ = - 0.2304; $\sum _ { i = 1 } ^ { n } y _ { i } x _ { 2 i }$ = 1.5676; $\sum _ { i = 1 } ^ { n } x _ { 1 \mathrm { i } } x _ { 2 i }$ = -0.0520
The heteroskedasticity-robust standard errors of the two slope coefficients are 1.99 (for population growth)and 0.23 (for the saving rate). Calculate the 95% confidence interval for both coefficients. How many standard deviations are the coefficients away from zero?

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