## [answered] Microsoft Word - project11s2.docxMicrosoft Word - project11

Microsoft Word - project11s2.docxMicrosoft Word - project11s2.docx

The Reserve Bank of Australia reports the interbank cash rate and the Australian dollar exchange rate against the US dollar. The following table lists the two series for the period November 2009 through October 2010.

Microsoft Word - project11s2.docx

Month ? ? ??Cash Rate ??Exchange Rate

Microsoft Word - project11s2.docx

Nov.2009 ? ?3.48 ? ? ? ?0.918

Dec.2009 ? 3.74 ? ? ? ? 0.897

Jan.2010 ? ?3.75 ? ? ? ? 0.891

Feb.2010 ? ?3.75 ? ? ? ? 0.890

Mar.2010 ? ?3.98 ? ? ? ?0.916

Apr.2010 ? ?4.22 ? ? ? ?0.930

May.2010 ? 4.48 ? ? ? ?0.849

Jun.2010 ? ?4.50 ? ? ? ?0.852 ? ? ? ? ??

Jul.2009 ? ?4.50 ? ? ? ?0.899

Aug.2009 ?4.50 ? ? ? ?0.892

Sep.2010 ? 4.50 ? ? ? ?0.967

Oct.2010 ? 4.50 ? ? ? ?0.976

Microsoft Word - project11s2.docx

1. a) ?Find the covalence and correlation coefficient between the interbank cash rate and the AUD exchange rate against the USD. Interpret your findings.
2. b) Imagine that you were contemplating running a single regression, as follows (you do not need to actually run the regression): E????=????0+????1C????+????????

where C is the interbank cash rate and E is the exchange rate. Would you expect to get a positive, negative, or zero slope estimate? Explain.

(I need detailed explanation, thank you)

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This question was answered on: Sep 18, 2020

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