#### Econometrics

#### Business & Finance homework help

Q1.1

Q1.2

The p-value of B1 (0.000) is less than the significant level 0.05. So, B1 is significant at 5% which implies that interest rate has a negative effect on South Korean foreign exchange.

According to economic theory, the interest rate is supposed to correlate with the exchange rate whereas the interest rate goes high it should make a change in the exchange rate but in this case, the interest rate has no correlation to the exchange rate. This is due to lag effect. If there is 1%-point increase in interest, the NEER will fall by 7.467304.

The p-value of B2 (0.000) is less than the significant level 0.05. So, B2 is significant at 5% which implies that money supply has a positive effect on South Korean foreign exchange.

The change in the unit of money supply is affecting the coefficient by 0.0000197. So according to the economic theory, the money supply should be affecting the foreign exchange rate, but in this case, the money supply has no correlation to the exchange rate. This is due to lead-lag effect. If there is 1 increase in money supply, there is a 0.0000197 effect in the coefficient.

The p-value of B3 (0.376) is more than the significant level 0.05. So, B3 is insignificant at 5% which implies that EX has no effect on South Korean foreign exchange.

The p-value of B4 (0.188) is more than the significant level 0.05. So, B4 is insignificant at 5% which implies that IM has no effect on South Korean foreign exchange.

The p-value of B5 (0.154) is more than the significant level 0.05. So, B6 is insignificant at 5% which implies that NPI has no effect on South Korean foreign exchange.

The p-value of B6 (0.198) is more than the significant level 0.05. So, B6 is insignificant at 5% which implies that KOSPI has no effect on South Korean foreign exchange.

The p-value of B7 (0.001) is less than the significant level of 0.05. So, B7 is significant at 5% which implies that USD has a positive effect on South Korea foreign exchange.

The change in the unit of USD is affecting the coefficient by -.5095166. So according to the economic theory, USD should be affecting the foreign exchange rate. If there is 1point increase in USD, the NEER will fall by 0.5095166.

Q1.3

Looking upon the data we have, we can conclude that change in 1 unit of standard deviation of KOSPI will result in a fall of the exchange rate of South Korea by 0.7066824. However, according to the Model we are following KOSPI is insignificant and hence does not affect the exchange rate

Q1.4

Q2.1

Q2.2

According to the fitted model, an employee having a university degree will reduce their pay by 15.83518. However, there is no significant effect of university degree on monthly wage. This is because p-value is 0.367 which is higher than 0.05. So, this company has no discrimination against its staff on the basis of degree.

Q2.3

The p-value of EDU (0.000) is less than 0.05 which means that it is significant at 5%. So, in this case it shows a sign for wage discrimination on the basis of education in the Singapore labour market.

The p-value of EXP (0.763) is more than 0.05 which means that it is insignificant at 5%. So, in this case it does not show any sign for wage discrimination on the basis of working experience of an employee in the Singapore labour market.

The p-value of AGE is (0.000) is less than 0.05 which means that it is significant at 5%. So, in this case it shows a sign for wage discrimination on the basis of age of an employee in the Singapore labour market.

The p-value of GEN (0.660) is more than 0.05 which means that it is insignificant at 5%. So, in this case it does not show any sign for wage discrimination on the basis of gender of an employee in the Singapore labour market.

The p-value of UNI (0.367) is more than 0.05 which means that it is insignificant at 5%. So, in this case it does not show any sign for wage discrimination on the basis of graduation of an employee in the Singapore labour market.

The p-value of NAT (0.381) is more than 0.05 which means that it is insignificant at 5%. So, in this case it does not show any sign for wage discrimination on the basis of nationality of an employee in the Singapore labour market.

The p-value of M (0.136) is more than 0.05 which means that it is insignificant at 5%. So, in this case it does not show any sign for wage discrimination on the basis of married status of an employee in the Singapore labour market.

Q2.4

Q2.5

As P value is bigger than the T value is insignificant. Hence, we can say a Singapore employee will not see a bigger wage increment form each additional year of work experience.

Q3.1

The p-value of GOV (0.759) which implies that GOV is more than the significant level 0.05. So, GOV is insignificant at 5% (0.05).

The p-value of INT (0.002) which implies that INT is less than the significant level (0.05). So, INT is significant at 5%.

According to economic theory, the interest rate is supposed to correlate with the exchange rate whereas the interest rate goes high it should make a change in the exchange rate but in this case, the interest rate has no correlation to the exchange rate. This is due to lag effect. If there is 1%-point increase in interest, the NEER will increase by 0.5162693.

The p-value of M2 (0.382) which implies that M2 is more than the significant level 0.05. So, M2 is insignificant at 5% (0.05).

The p-value of REER (0.000) which implies that REER is less than the significant level 0.05. So, REER is significant at 5% (0.05).

According to economic theory, the interest rate is supposed to correlate with the exchange rate whereas the interest rate goes high it should make a change in the exchange rate but in this case, the interest rate has no correlation to the exchange rate. This is due to lag effect. If there is 1%-point increase in interest, the NEER will fall by 0.2577273.

Q3.2

Q1.2

The p-value of B1 (0.000) is less than the significant level 0.05. So, B1 is significant at 5% which implies that interest rate has a negative effect on South Korean foreign exchange.

According to economic theory, the interest rate is supposed to correlate with the exchange rate whereas the interest rate goes high it should make a change in the exchange rate but in this case, the interest rate has no correlation to the exchange rate. This is due to lag effect. If there is 1%-point increase in interest, the NEER will fall by 7.467304.

The p-value of B2 (0.000) is less than the significant level 0.05. So, B2 is significant at 5% which implies that money supply has a positive effect on South Korean foreign exchange.

The change in the unit of money supply is affecting the coefficient by 0.0000197. So according to the economic theory, the money supply should be affecting the foreign exchange rate, but in this case, the money supply has no correlation to the exchange rate. This is due to lead-lag effect. If there is 1 increase in money supply, there is a 0.0000197 effect in the coefficient.

The p-value of B3 (0.376) is more than the significant level 0.05. So, B3 is insignificant at 5% which implies that EX has no effect on South Korean foreign exchange.

The p-value of B4 (0.188) is more than the significant level 0.05. So, B4 is insignificant at 5% which implies that IM has no effect on South Korean foreign exchange.

The p-value of B5 (0.154) is more than the significant level 0.05. So, B6 is insignificant at 5% which implies that NPI has no effect on South Korean foreign exchange.

The p-value of B6 (0.198) is more than the significant level 0.05. So, B6 is insignificant at 5% which implies that KOSPI has no effect on South Korean foreign exchange.

The p-value of B7 (0.001) is less than the significant level of 0.05. So, B7 is significant at 5% which implies that USD has a positive effect on South Korea foreign exchange.

The change in the unit of USD is affecting the coefficient by -.5095166. So according to the economic theory, USD should be affecting the foreign exchange rate. If there is 1point increase in USD, the NEER will fall by 0.5095166.

Q1.3

Looking upon the data we have, we can conclude that change in 1 unit of standard deviation of KOSPI will result in a fall of the exchange rate of South Korea by 0.7066824. However, according to the Model we are following KOSPI is insignificant and hence does not affect the exchange rate

Q1.4

**Q1.5. i****: = 5****: 5****As T is bigger than 1.95996 we reject the.****Q1.5. ii****Or****Degree of freedom = (1, 88)****F (1, 88) = 4****As the T value is lower than 4 we accept the.****Q1.5. iii****Degree of freedom = (1, 92)****F (1, 92) = 3.92****As the T value is higher than 3.92 we reject the.**Q2.1

Q2.2

According to the fitted model, an employee having a university degree will reduce their pay by 15.83518. However, there is no significant effect of university degree on monthly wage. This is because p-value is 0.367 which is higher than 0.05. So, this company has no discrimination against its staff on the basis of degree.

Q2.3

The p-value of EDU (0.000) is less than 0.05 which means that it is significant at 5%. So, in this case it shows a sign for wage discrimination on the basis of education in the Singapore labour market.

The p-value of EXP (0.763) is more than 0.05 which means that it is insignificant at 5%. So, in this case it does not show any sign for wage discrimination on the basis of working experience of an employee in the Singapore labour market.

The p-value of AGE is (0.000) is less than 0.05 which means that it is significant at 5%. So, in this case it shows a sign for wage discrimination on the basis of age of an employee in the Singapore labour market.

The p-value of GEN (0.660) is more than 0.05 which means that it is insignificant at 5%. So, in this case it does not show any sign for wage discrimination on the basis of gender of an employee in the Singapore labour market.

The p-value of UNI (0.367) is more than 0.05 which means that it is insignificant at 5%. So, in this case it does not show any sign for wage discrimination on the basis of graduation of an employee in the Singapore labour market.

The p-value of NAT (0.381) is more than 0.05 which means that it is insignificant at 5%. So, in this case it does not show any sign for wage discrimination on the basis of nationality of an employee in the Singapore labour market.

The p-value of M (0.136) is more than 0.05 which means that it is insignificant at 5%. So, in this case it does not show any sign for wage discrimination on the basis of married status of an employee in the Singapore labour market.

Q2.4

Q2.5

**As T is smaller than 1.95996 we accept the.**As P value is bigger than the T value is insignificant. Hence, we can say a Singapore employee will not see a bigger wage increment form each additional year of work experience.

Q3.1

The p-value of GOV (0.759) which implies that GOV is more than the significant level 0.05. So, GOV is insignificant at 5% (0.05).

The p-value of INT (0.002) which implies that INT is less than the significant level (0.05). So, INT is significant at 5%.

According to economic theory, the interest rate is supposed to correlate with the exchange rate whereas the interest rate goes high it should make a change in the exchange rate but in this case, the interest rate has no correlation to the exchange rate. This is due to lag effect. If there is 1%-point increase in interest, the NEER will increase by 0.5162693.

The p-value of M2 (0.382) which implies that M2 is more than the significant level 0.05. So, M2 is insignificant at 5% (0.05).

The p-value of REER (0.000) which implies that REER is less than the significant level 0.05. So, REER is significant at 5% (0.05).

According to economic theory, the interest rate is supposed to correlate with the exchange rate whereas the interest rate goes high it should make a change in the exchange rate but in this case, the interest rate has no correlation to the exchange rate. This is due to lag effect. If there is 1%-point increase in interest, the NEER will fall by 0.2577273.

Q3.2

**As LM is smaller than 3.841 we accept the.**