Question: From a sample of 79 quarterly observations the following model was estimated

using OLS

yˆ ??0.0027 ??0.7916x ,

where y is the nominal interest rate and x is inflation. The R2 is 0.097 and the estimated standard error of the estimator for the slope is 0.2759.

a) Interpret the estimate for the slope and the value obtained for R2.

b) Test the hypothesis that the slope coefficient is less than or equal to zero against the hypothesis that it is greater than zero. Interpret the result.

c) Test the hypothesis that the slope coefficient is equal to 1 against the hypothesis that it is different from 1. Interpret the result.