Question
from the annual observations from 1980 to 1940, the following regression results were obtain, where y=exchange rate of euro to the US dollar (E/S) and
from the annual observations from 1980 to 1940, the following regression results were obtain, where y=exchange rate of euro to the US dollar (E/S) and x=ratio of the US consumer price index to the Euro consumer price index; that is, X represents the relative prices in the two countries: y = 6.682-4.318 xt, where, se = (1.22)(1.333); R2 =0.528. i. interpret this regression. what is the correlation between y and x does the negative value of Xt make economic sense? why? iii. if X is redefined as the ratio of the Euro consumer price index to the US consumer price index. would that change the sign of X? why
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