The Following Regression Model Was Estimated to Forecast the Percentage $\mu$

question 42

Multiple Choice

The following regression model was estimated to forecast the percentage change in the Australian Dollar (AUD) : AUD_t = a₀ + a₁INT_t + a₂INF_{t - 1} + $\mu$ _t,
Where AUD is the quarterly change in the Australian Dollar, INT is the real interest rate differential in period t between the U.S. and Australia, and INF is the inflation rate differential between the U.S. and Australia in the previous period. Regression results indicate coefficients of a₀ = .001; a₁ = -.8; and a₂ = .5. Assume that INF_{t - 1} = 4%. However, the interest rate differential is not known at the beginning of period t and must be estimated. You have developed the following probability distribution:
There is a 20% probability that the Australian dollar will change by ____, and an 80% probability it will change by ____.

• A) 4.5%; 6.1%;
• B) 6.1%; 4.5%
• C) 4.5%; 5.3%
• D) None of the above

Gain skills in document reviewing and publishing, including the use of specific Word features for blogs, templates, and comparison tools.

Understand the impacts of political efficacy on democratic participation.

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Comprehend the evolution of naturalization laws and their significance.

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