You are assigned to check whether the relative version of the purchasing power parity holds. Using data
Question:
You are assigned to check whether the relative version of the purchasing power parity holds. Using data provided to you for the period 1971-2021 (see Excel file), prepare a brief report on the following question: Does the purchasing power parity hold for the British pound—US dollar exchange rate? Among other things you need to do the following:
Plot past exchange rate changes against differential inflation rates between Britain and the United states.
Using Excel, regress the percentage exchange rate changes on the inflation rate differential to estimate the intercept and the slope coefficient. Provide an interpretation of the regression results. What do you conclude? Why? Explain your answer.
Business Statistics In Practice
ISBN: 9780073401836
6th Edition
Authors: Bruce Bowerman, Richard O'Connell