FNCE 4P05 Individual Project | Solution

The individual project involves using the exchange rate theory that we cover in this course and conducting basic statistical analysis.

Part 1: Data Collection

Please extract the following quarterly data from Bloomberg, FRED, Federal Reserve Economic data, http://research.stlouisfed.org/fred2/categories/15, IMF, or World Bank Data. You may download the monthly data on that side and get the data for the following dates: April 1, July 1, Oct 1, and Dec 31(Jan 1).

  1. Exchange rates per U.S. Dollar for the following currencies:

      Over the sample period from January 2000 to December 2022

  • EUR (Euro)
    • CAD (Canadian Dollar)
    • CHF (Swiss Franc)
    • GBP (British Pound)
    • MXN (Mexican Peso)
    • THB (Thai Baht)
    • TRY (Turkish Lira)
    • BRL (Brazilian Real)

TRY/USD data can be found here:

https://ca.investing.com/currencies/usd-try-historical-data

  • Quarterly Consumer Price Inflation (CPI) Index, GDP, nominal interest rate for each respective country from January 2000 to December 2022.

You may check variety of sources; Corresponding central bank, Bloomberg Terminal, investing.com etc.

  • Quarterly Crude Oil WTI Futures Historical Data

https://www.investing.com/commodities/crude-oil-historical-data

You may use the monthly data and then convert it to quarterly data to be compatible with the other data sets in your study.

Part 2: Statistical Analysis

Plot the change of exchange rate data and explain whether you can capture any patterns. Interpret your finding in detail.

  1. Run an OLS regression of the percent quarterly exchange rates during the period from January 2000to December 2022 on the following economic variables:
    1. Inflation rate   
    1. Economic growth
    1. Trade balance
    1. Interest rate differential against US 3-month short-term T-bill rates
  2. Plot trade balance against exchange rate changes and is there theory behind this graph?
  3. Analyze the relation between the oil price and exchange rate for the Canadian market
  4. Analyze any two countries’ Balance of Payments (BOP) (from 2000 to 2022) and explain the reason why direct investment and portfolio flow change. Link may be helpful. (http://data.worldbank.org/indicator/BN.CAB.XOKA.CD)

Requirement

– The report cannot exceed 10 pages long (font size 11 and excluding graphs, tables, quantitative analyses, and references) and all tables and figures should be included at the end of the report as an appendix.

– The deadline is Dec 5, 2024.

Refreshment:

– Simple Linear OLS Regression in EXCEL

https://online.hbs.edu/blog/post/what-is-regression-analysis

Find Solution
Previous Post Next Post