Sunday, March 25, 2012

ECN 403 Practical Job 4

download Job4 data table 1.3 table 2.8


Use data from folder “gujrati data” saved in your computer.

1.3. Table 1.3 gives the foreign exchange rates for seven industrialized countries

for years 1977–1998. Except for the United Kingdom, the exchange rate is

defined as the units of foreign currency for one U.S. dollar; for the United

Kingdom, it is defined as the number of U.S. dollars for one U.K. pound.

a. Plot these exchange rates against time and comment on the general

behavior of the exchange rates over the given time period.

b. The dollar is said to appreciate if it can buy more units of a foreign

currency. Contrarily, it is said to depreciate if it buys fewer units of a

foreign currency. Over the time period 1977–1998, what has been the

general behavior of the U.S. dollar? Incidentally, look up any textbook

on macroeconomics or international economics to find out what factors

determine the appreciation or depreciation of a currency.

2.15. Table 2.8 gives data on expenditure on food and total expenditure, measured

in rupees, for a sample of 55 rural households from India. (In early

2000, a U.S. dollar was about 40 Indian rupees.)

a. Plot the data, using the vertical axis for expenditure on food and the

horizontal axis for total expenditure, and sketch a regression line

through the scatterpoints.

b. What broad conclusions can you draw from this example?

c. A priori, would you expect expenditure on food to increase linearly as

total expenditure increases regardless of the level of total expenditure?

Why or why not? You can use total expenditure as a proxy for total

income.

To add a trend line/regression line after plotting the scatter diagram, right click on the scatter points in graph/ diagram, you will find an option “ Add trend line”, click it and choose type of trend ( linear/ exponential/ log etc).

  1. Also estimate the OLS REGRESSSION of expenditure (Y) on food on total expenditure using data table 2.8. Interpret the result.

[ Hint : data analysis : regression , choose range of data for dependent and independent and output range]