Business Research Methods

BUSINESS RESEARCH METHODS
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Question 1
(a) The statistical significance of the parameters can be estimated from the p value associated
with the slope coefficients of the different independent variables. Assuming a significance
level of 5%, it is apparent that p value of slope cficients of all the parameters except inflation
is lower than 0.05. This implies that all parameters except inflation are statistically significant
as the underlying slope cannot be assumed to be zero (Flick, 2015).
The slope coefficient for oil is negative as there tends to be an adverse relationship between
real GDP and oil prices. The slope magnitude is 0.037 which implies that a change in the oil
prices by $1 per barrel would tend to change the real GDP growth rates is US by 0.037 units.
The slope coefficient for interest rate (INTERSTRATE) is negative which is on expected
lines as higher interest rates tend to make credit expensive and adversely impact economic
growth. The slope magnitude is 0.012 which implies that a change in the interest rate by 1%
would tend to change the real GDP growth rates is US by 0.012 units. The slope coefficient
for inflation is negative as higher inflation would lead to lower real GDP growth. The slope
magnitude is 0.004 which implies that a change in the inflation rate by 1% would tend to
change the real GDP growth rates is US by 0.004 units (Hair et. al., 2015).
The R2 value for thee given regression model is 58% which implies that the given
independent variables can jointly explain 58% of the variation in the real GDP growth rate in
US. Considering that two of the three slope coefficients are significant coupled with a
moderately high R2 value would imply that the model is a good fit (Hillier, 2016).
(b) The results are broadly in line with the theory considering that higher inflation, interest
rate or oil prices would tend to have adverse impact on growth. The increase in all these
factors tend to lead to lower demand and potentially have adverse impact on consumption
owing to which adversely impact real GDP growth. Inflation for instance would increase
nominal GDP growth but since higher prices would adversely impact consumption volume,
hence real GDP growth would be lower. Similarly, higher interest rates tend to lower lending
owing to which there is a slowdown in demand and hence real GDP growth is adversely
impacted.
Question 4