Measuring Effects on Exchange Rates. Tarheel Co. plans to determine how changes in U.S. and Mexican real interest rates will affect the value of the U.S.

dollar. (See Appendix C for the basics of regression analysis.)

a. Describe a regression model that could be used to achieve this purpose. Also explain the expected sign of the regression coefficient.

b. If Tarheel Co. thinks that the existence of a quota in particular historical periods may have affected exchange rates, how might this be accounted for in the regression model?