File Home Insert Page Layout Formulas Data Review View Help Tell me what you want to do Fill Format PainterB Problem 2. Regression Analysis. (Hint: Topic 7_Part1.xlsx - Regression) Economists have long believed that the greater the amount of mony printed, the higher the long-term interest rates. Evidence for this view can be found in the table below, which gives long-term government bond rates for 31 countries and the corresponding growth rate of money supply for each country. Problem 2.1: Plot the data, and use a regression to find the relation between the money growth and the long term bond interest rate Problem 2.2: If a country has zero money growth, what is its predicted long-term bond interest rate? Problem 2.3:1 he monetary authorities in your country are considering increasing the money growth rate by 1% from its current level. Predict by how much this will increase the long term bond interest rate MONEY GROWTH AND BOND INTEREST RATES Answer of Problem 2.1: Average money Average long-term growth bond interest rate Periad Country US 7.40% 7.80% 8.22% 10.36% 8.49% 7.20% 0.66% 7.31% 8.00% 4.54% 8.52% 6.16% 10.38% 10.79% 12.72% 8.95% 8.81% 11.11% 15.57% 15.35% 9.40% 9.10% 16.53% 8.59% 7.88% 10.62% 17.62% 12.01% 12.12% 13.17% 28.92% 1960:1-1998:1 1965:1-1997:1 1960:1 1997:1 19601-1998:1 1960:1 1997:1 1960:1-1998:1 1960:11997:1 1960:1-1997:1 1960: 1 1998:1 1960:1-1998:1 1960:1-1998:1 1960:1-1998:1 1960:1-1996:1 1960:1-1997:1 1979:1-1997:1 1960:1-1998:1 1960:1-1997:1 1960:1-1998:1 1983:1-1998:1 1962:1-1997:1 1983:1-1998:1 1967:1-1992:1 1974:1-1998:1 1981:1-1997:1 1960:1-1997:1 1976:1.1998:1 1981:1-1997:1 1968:1 1992:1 1981:1-1998:1 1979:1 1998: 1 1984:1-1998:1 6.82% 5.20% 9.43% 8.15% 8.00% 12.07% France 10.64% 5.53% 8.99% 9.07% 9.43% 12.91% 10.38% 9.15% 10.29% 14. 14% 16.20% 19.88% 4.36% Norway Switzerland Canada pan Ireland Portugal Spain Australia New Zealand outh Africa Netherlands Antilles Trinidad & Tobago Korea Answer of Problem 2.2: Intercept of the regression slope of the regression 15.12% 15.55% 12.79% 10.86% 20.80% 13.49% 15.89% 12.90% 28.47% Pakistan hailand Malawi imbabwe Solomon Islands Western Samoa Venezu Money growth rate Estimated long-term interest rate 096 Answer of Problem 2.3: A1% increase in money growth rate should increase the long File Home Insert Page Layout Formulas Data Review View Help Tell me what you want to do Fill Format PainterB Problem 2. Regression Analysis. (Hint: Topic 7_Part1.xlsx - Regression) Economists have long believed that the greater the amount of mony printed, the higher the long-term interest rates. Evidence for this view can be found in the table below, which gives long-term government bond rates for 31 countries and the corresponding growth rate of money supply for each country. Problem 2.1: Plot the data, and use a regression to find the relation between the money growth and the long term bond interest rate Problem 2.2: If a country has zero money growth, what is its predicted long-term bond interest rate? Problem 2.3:1 he monetary authorities in your country are considering increasing the money growth rate by 1% from its current level. Predict by how much this will increase the long term bond interest rate MONEY GROWTH AND BOND INTEREST RATES Answer of Problem 2.1: Average money Average long-term growth bond interest rate Periad Country US 7.40% 7.80% 8.22% 10.36% 8.49% 7.20% 0.66% 7.31% 8.00% 4.54% 8.52% 6.16% 10.38% 10.79% 12.72% 8.95% 8.81% 11.11% 15.57% 15.35% 9.40% 9.10% 16.53% 8.59% 7.88% 10.62% 17.62% 12.01% 12.12% 13.17% 28.92% 1960:1-1998:1 1965:1-1997:1 1960:1 1997:1 19601-1998:1 1960:1 1997:1 1960:1-1998:1 1960:11997:1 1960:1-1997:1 1960: 1 1998:1 1960:1-1998:1 1960:1-1998:1 1960:1-1998:1 1960:1-1996:1 1960:1-1997:1 1979:1-1997:1 1960:1-1998:1 1960:1-1997:1 1960:1-1998:1 1983:1-1998:1 1962:1-1997:1 1983:1-1998:1 1967:1-1992:1 1974:1-1998:1 1981:1-1997:1 1960:1-1997:1 1976:1.1998:1 1981:1-1997:1 1968:1 1992:1 1981:1-1998:1 1979:1 1998: 1 1984:1-1998:1 6.82% 5.20% 9.43% 8.15% 8.00% 12.07% France 10.64% 5.53% 8.99% 9.07% 9.43% 12.91% 10.38% 9.15% 10.29% 14. 14% 16.20% 19.88% 4.36% Norway Switzerland Canada pan Ireland Portugal Spain Australia New Zealand outh Africa Netherlands Antilles Trinidad & Tobago Korea Answer of Problem 2.2: Intercept of the regression slope of the regression 15.12% 15.55% 12.79% 10.86% 20.80% 13.49% 15.89% 12.90% 28.47% Pakistan hailand Malawi imbabwe Solomon Islands Western Samoa Venezu Money growth rate Estimated long-term interest rate 096 Answer of Problem 2.3: A1% increase in money growth rate should increase the long
