Math Physic Economic Statistic

Math Physic Economic Statistic Problems

This research must show analytical a quantitative proof to explain economic variables affecting each problem set.
This research must show analytical a quantitative proof to explain economic variables affecting each problem set. The instructions for the problem set are given within the outline of the Microsoft word document.

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Math Physic Economic Statistic Problems
International Economics
Problem Set #2
1. Analyze the dynamics of the U.S. current account data (U.S. exports and imports of goods, services and unilateral transfers) over the past ten years. Use the Bureau of Economic Analysis website http://www.bea.gov/international/index.htm . What have been the major factors contributing to the increase in U.S. exports over the past 10 years? What have been the main factors contributing to the increase in U.S. imports?

2. Explain the Purchasing Power Parity theory of exchange rate determination, both its absolute and its relative form. From the Federal Reserve Bank of St. Louis FRED database, download the monthly data series of: a. the Canadian Dollar (CAD) value of USD, coded in FRED as EXCAUS, b. the changes from a year ago series of U.S. CPI and c. the Canadian CPI – all since January 1980 till September 2015. Copy the data graphs to your answer pages and discuss whether the USD value in CAD exchange rate has followed the Canadian vs. U.S. inflation differential over the past 35 years.

3. Briefly explain the Interest Rate Parity theory of exchange rate determination. Discuss whether this theory is confirmed by examining the relationship between the USD value of the euro (EUR) and the differential between US and German long-term interest rates. For this purpose, download to a single Excel file from the FRB of St. Louis FRED database:
a. The monthly series of the USD to one EUR for the sample period January 1999 – September 2015, data code: EXUSEU
b. 10-year US Treasury Note yield for the same sample period, code: GS10
c. 10-year German Government bond yield for the same sample period, code: IRLTLT01DEM156N.
Show a scattergram of the USD per EUR exchange rate and the difference between US
and German 10Y bond yield, discuss the analytical result.

4. The spot rate of the GBP in USD terms was 1.6530 and the three-month forward rate was 1.6518 on March 25, 2014. Calculate the annualized forward premium (or discount) of the GBP in USD terms. Briefly explain what economic factors decide about the obtained forward premium (or discount).

5. (a) What is the effect on the exchange rate of an increase in the country’s money supply according to the asset market or portfolio approach.
(b) In what ways does it differ from the monetary approach?
(c) Do empirical tests support or reject the monetary and asset market or portfolio approaches?

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