Interpretation of data (Fixed effects model)

[Ali HassanTaleb]

Hi All,

I really appreciate your help for my questions below.

I have the following Fixed Effects model:


RevenueGrowth_it = 1,54*RealGDPgrowth_it - 2,768*UnemploymentRate_it + 2,987*InflationRate_it


The revenue growth is calculated as follows (therefore in %): Revenue Growth = ((Revenue_t - Revenue_t-1) / Revenue_t-1) * 100

The Real GDP Growth and the Inflation rate are both measured in %.

My questions are:

1. How do I interpret the output (my beta coefficients from the regression stated above)?
2. I now want to find out how good my model has been to predict the historical observed revenue growths for a firm during the year 2010. To do that I multiply the beta coefficient for the GDP growth with the realized GDP growth in the year 2010. I do the same for the inflation rate and the unemployment rate. Here comes my question now: If the result is 9,8 - then what does that mean? Does it mean that the revenue growth according to my model should have been 9,8% in 2010, or is it something else regarding percentage points maybe?

I really appreciate your help! :-)

Best regards.

[Ali HassanTaleb]

Carlo Lazzaro I hope you have time to help me with above stated questions. Appreciated