Apply regression analysis in which the percentage change in the trade balance is the dependent variable and the percentage change in the exchange rate is the independent variable. Is there a significant relationship between the two variables? Is the direction of the relationship as expected? If you think that the exchange rate movements affect the trade balance with a lag (because the transactions of importers and exporters may be booked a few months in advance), you can reconfigure your data to assess that relationship (match each monthly percentage change in the balance of trade with the exchange rate movement that occurred a few months earlier).

FindFind

International Financial Management

14th Edition
Madura
Publisher: Cengage
ISBN: 9780357130698
FindFind

International Financial Management

14th Edition
Madura
Publisher: Cengage
ISBN: 9780357130698

Solutions

Chapter 2, Problem 5IEE
Textbook Problem

Apply regression analysis in which the percentage change in the trade balance is the dependent variable and the percentage change in the exchange rate is the independent variable. Is there a significant relationship between the two variables? Is the direction of the relationship as expected? If you think that the exchange rate movements affect the trade balance with a lag (because the transactions of importers and exporters may be booked a few months in advance), you can reconfigure your data to assess that relationship (match each monthly percentage change in the balance of trade with the exchange rate movement that occurred a few months earlier).

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