A regression analysis of the Australian dollar value on the inflation differential between the United States and Australia produced a coefficient of .8. Thus, for every 1 percent increase in the inflation differential, the Australian dollar is expected to depreciate by .8 percent.

Question

Quizplus · Accepted Answer

The coefficient of .8 in the regression analysis indicates the change in the dependent variable (Australian dollar value) for a one-unit change in the independent variable (inflation differential between the United States and Australia). Therefore, a .8 coefficient means the Australian dollar is expected to depreciate by .8 percent for every 1 percent increase in the inflation differential.

A Regression Analysis of the Australian Dollar Value on the Inflation