You are assigned to check whether the relative version of the purchasing power parity holds. Using data provided to you for the period 1971-2021 (see Excel file), prepare a brief report on the following question: Does the purchasing power parity hold for the British pound—US dollar exchange rate? Among other things you need to do the following:

Plot past exchange rate changes against differential inflation rates between Britain and the United states.

Using Excel, regress the percentage exchange rate changes on the inflation rate differential to estimate the intercept and the slope coefficient. Provide an interpretation of the regression results. What do you conclude? Why? Explain your answer. 

year 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 InflationGBR 9.4448374 7.0710984 ghu,mu, (61uuse:0:22 9.1960332 Sheet1 16.044011 24.207288 16.559523 15.840267 8.263141 13.42128 17.965924 11.876627 8.5988638 4.6093033 4.960711 6.0713943 3.4276094 4.1489223 4.1553517 5.7602491 8.0634609 7.461783 4.5915493 2.558578 2.2190126 2.6974952 1996 2.8517824 1997 2.2011431 1998 1.8205616 1999 1.7529508 2000 1.1829562 + GBP/USD 4.2927667 2.4442 3.2722782 2.5034 6.1777601 2.4525 11.054805 2.3403 9.1431469 2.2217 5.7448126 1.8048 6.501684 1.7449 7.6309638 1.9184 11.254471 2.1224 13.549202 2.3246 10.334715 2.0243 6.131427 1.7480 3.2124352 1.5159 4.3005355 1.3368 3.5456442 1.2974 1.8980477 1.4677 3.6645632 1.6398 4.0777411 1.7813 4.827003 1.6382 5.3979564 1.7841 4.234964 1.7674 3.0288197 1.7663 2.951657 1.5016 2.6074416 1.5319 2.8054197 1.5785 2.9312042 1.5607 2.3376899 1.6376 1.5522791 1.6573 2.1880272 1.6172 3.3768573 1.5156 Inflation USA