Question

Assume that a regression of exchange rate changes on the expected exchange rate changes according to purchasing power parity (PPP) produced a coefficient of 2. This strongly indicates that PPP holds. a. True b. False

Answer 1

Here Null Hypothesis is that , there is no relationship between exchange rate changes and PPP exhange rate changes,

Relationship beween exchange rate changes and PPP exchange rate has a regression coefficient of 2.It means there is a positive relationship and both follow same trend or slope.It's a statistical relationship.Relation and to be statistically significant we need a value of P which is less than 0.05.Otherwise there is a probability that relationship is caused by chance too.Inaddition to this this relationship might be for a sample , which is not representative of bigger population.

P explains the probability that results are caused by some other extremeties.P less thatn 0.05 , rejects null hypothesis.

As question doesn't categorically mention about P value , we can't draw any logic and conculde relationship.

answered by: anonymous