Path Analysis - Definition Path analysis is a special use of multiple regression to help understand and parcel out the sources of variance. Many applications that have used stepwise multiple regression may have really been looking to do a path analysis and not realized it. One of the great myths of statistics is that regression is analysis of causal relationships. That is not the case - regression is merely an analysis of correlations, performed in a very specific way. Nonetheless, they are correlations, purely mathematical relationships.
Path analysis is a much more specific form of analysis that looks explicitly at cause.
That cannot be done with straight regression, either simple or multiple. Because the independent variables may well have relationships among them, sometimes even causal relationships. We know that mathematically, X1 and X2 must be quasi-independent, i.e., they cannot have an extremely high correlation. Yet we also know that they may indeed have a correlation, and that it may even be a meaningful one. The straight lines imply a direct causal link between the X variables and the dependent, Y, but there is a new line introduced - the curved line indicating a correlation between X1 and X2.