Assume that you received the following results from a regression model as follows:

2.

$ / h = 1.77 .06 () + .04 () 2.06 (h%)

Where: All figures in percentage terms and: DiffInterestRate = (US 1 year t-bill rate) (JPN 1 year government rate) DiffInflationRate = (US CPI) (JPN CPI) and, DiffDebtGrowth = (% Growth in US Public Debt) (% Growth in JPN Public Debt)

Partial output from the regression model follows:

Regression Statistics

Multiple R= 0.51217 R Square= 0.26232 Adjusted R Square= 0.21877

Standard Error= 0. 15677

Intercepts:

Coefficients= 1.77

t Stat= 31.573

P-value= 7.8E-108

DiffInterestRate:

Coefficient= -0.06

t Stat= -1.918

P-value= 0.042

DiffInflationRate:

Coefficient= 0.04

t Stat= -3.871

P-value= 6.9E-04

DiffDebtGrowth:

Coefficient= -2.06

t Stat= 3.323

P-value= 0.001

Describe and define the following:

1. The coefficients (i.e. discuss the coefficients on the independent variables and how they related to the dependent (exchange rate) variable).

2. The p-values (i.e., are these variables significant? At what level(s)?)

3. In your own words, define and describe the R-Squared and Adjusted R-Squared statistics (i.e., what do these statistics indicate about the model?)