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

Question

Quizplus · Accepted Answer

The coefficient of .8 indicates that for every 1% increase in the inflation differential, the Australian dollar is expected to appreciate by .8%. This is opposite of what the statement claims.

A Regression Analysis of the Australian Dollar Value on the Inflation