The following regression model was estimated to forecast the value of the Malaysian ringgit (MYR): MYR t=a0+a1INCt-1+a2INFt-1+ut where MYR is the quarterly change in the ringgit, INF is the previous quarterly percentage change in the inflation differential, and INC is the previous quarterly percentage change in the income growth differential. Regression results indicate coefficients a0 = .005; a1= .4; and a2= -.7.
Based on the regression result, which of the following statement is correct?
(A) For a one-unit percentage change in the inflation differential, Malaysian ringgit is expected to change by .7% in the same direction, other things held constant.
(B) For a one-unit percentage change in the inflation differential, Malaysian ringgit is expected to change by .4% in the same direction, other things held constant.
(C) For a one-unit percentage change in the inflation differential, Malaysian ringgit is expected to change by .4% in the opposite direction, other things held constant.
(D) For a one-unit percentage change in the inflation differential, Malaysian ringgit is expected to change by .7% in the opposite direction, other things held constant.
(E) none of the above is correct
Answers: 2
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The following regression model was estimated to forecast the value of the Malaysian ringgit (MYR): M...
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