Hypothesis testing helps determine the significance of regression coefficients from "summary" of Introduction to Econometrics by Christopher Dougherty
Hypothesis testing is a fundamental tool in econometrics that allows us to determine the significance of regression coefficients. When estimating a regression model, we obtain coefficients that indicate the relationship between the independent variables and the dependent variable. However, it is essential to assess whether these coefficients are statistically significant or simply a result of random chance. By using hypothesis testing, we can evaluate the likelihood that the estimated coefficient is different from zero. This process involves setting up a null hypothesis, usually denoted as H0, which states that the coefficient is equal to zero, implying that there is no relationship between the independent variable and the dependent variable. The alternative hypothesis, denoted as Ha, suggests that the coefficient is not equal to zero, indicating a significant relationship. To test the significance of a regression coefficient, we calcula...
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