The relationship between nominal exchange rate and relative prices. From annual observations from 1985 to 2005, the following regression results were obtained. Where: Y = exchange rate of the Canadian dollar to the U.S. dollar and X = ratio of the U.S. consumer price index to the Canadian consumer price index; that is, X represents the relative prices in the two countries: Ŷt = 6.682 4.318 0Xt se = 0.096 r² = 0.44

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How to Interpret this regression and interpret r^squared
The relationship between nominal exchange rate and relative prices. From annual observations from
1985 to 2005, the following regression results were obtained.
Where: Y = exchange rate of the Canadian dollar to the U.S. dollar and X = ratio of the U.S. consumer
price index to the Canadian consumer price index; that is, X represents the relative prices in the two
countries:
= 6.682 4.318 0Xt
0.096
r² = 0.44
se =
Transcribed Image Text:The relationship between nominal exchange rate and relative prices. From annual observations from 1985 to 2005, the following regression results were obtained. Where: Y = exchange rate of the Canadian dollar to the U.S. dollar and X = ratio of the U.S. consumer price index to the Canadian consumer price index; that is, X represents the relative prices in the two countries: = 6.682 4.318 0Xt 0.096 r² = 0.44 se =
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