SOLUTION: A regression model examines the relationship between regulatory quality and bad loans in the banking system. What is the expected sign of the slope coefficient?
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Question 942311: A regression model examines the relationship between regulatory quality and bad loans in the banking system. What is the expected sign of the slope coefficient? Answer by jim_thompson5910(35256) (Show Source):
You can put this solution on YOUR website! On average, you expect that as the regulatory quality goes up, the number of bad loans goes down. The same can be said in reverse: as the number of bad loans go down, the regulatory quality goes up.
This inverse relationship implies the sign of the slope coefficient is negative since we have negative correlation.
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