The Scatter Plot

ECON352InternationalFinance-SemesterTwo2021 ProblemSet:DataAnalysis-1 (9MarksinTotal) ‹ Thisassignmentisdue at23:59,5September2021 . ‹ SubmityouranswerviaCANVASas ONE singlepdf˝le. ‹ Answerall THREE questions.Eachquestionisworth3marks. ‹ Useappropriatesoftwaretoproduceyourplotsandtowriteyouranswers. ‹ Summarizeallthedatasourcesinthereferencelist. ‹ Documentproperlyanymanipulationwithdatayoumadetoobtaintheplots. Question1.(AbsolutePPP) Collecttherelevantdata(fromWorldBankOpenDataand/or FRED)andreplicatethefollowing˝gureforthreecountriesvs.theUntedStatesin 1990- 2020 ,respectively. (a) PlottheevolutionofthenominalexchangerateandtherelativepricelevelsoftheU.S.vs. theU.K.Inaseparate˝gure,plottheevolutionoftherealexchangerateofUSDperone Britishpound.DoesabsolutePPPseemtohold?Why?[Hint:identifythebasecurrency, usetheGDPde˛atortomeasurethepricelevelineachcountry.] (b) Repeatthestepsinquestion 1(a) forahigh-incomecountryversustheU.S.andfora upper-middle-incomecountryversustheU.S.,respectively.DoesabsolutePPPseemto hold?Why?[Seethefollowingtableforthetwocountriesassignedtoyou.] 1 LastDigitofYourStudentID HighIncome Upper-Middle-Income 0or1or2 Australia China 3or4or5 Canada India 6or7or8or9 NewZealand SouthAfrica Question2.(RelativePPP) Collecttherelevantdata(fromWorldBankOpenDataand/or FRED)andreplicatethefollowingforthreecountriesvs.theU.S.in 1990-2020 ,respec- tively. (a) ComputetheaverageUK-USin˛ationratedi˙erential(in%,peryear,usetheGDPde˛ator tocalculatethein˛ationrate)andtheaveragerateofdepreciationoftheBritishpound vs.theUSdollar(in%,peryear)between1990and2020.Plotyourobservationpoint andthe45%degreelineasinFigure3-2.[Hint:identifythebasecurrency.] (b) Repeatthestepsinquestion 2(a) forthehigh-incomecountryandtheupper-middle-income countryversustheU.S.,respectively.[Seethetableinquestion 1(b) forthetwocountries assignedtoyou.]DoyourobservationscontradictthepredictionsoftherelativePPP? Why? Question3.(FisherE˙ect) Usetheattacheddata˝leQ3_data.xlsx"andcreatethescatter plotforsixcountriesvs.theUnitedStatesin2001-2019. 2 (a) Computetheaveragein˛ationratedi˙erential(in%,peryear,usetheGDPde˛atorto derivethein˛ationrate)andtheaverageinterestratedi˙erential(in%,peryear)forUK, euroarea,Switzerlandvs.theU.S.between2001and2019.Plotthethreeobservation pointsandthe45%degreelineasinFigure3-12. (b) Repeatthestepsinquestion 3(a) fortheotherthreecountriesversustheU.S.,respectively. [Seethefollowingtableforthethreecountriesassignedtoyou.]Doyourobservations contradictthepredictionsoftheFishere˙ect?Why? LastDigitofYourStudentID HighIncome 0or1or2 Australia,Canada,NewZealand 3or4or5 Denmark,Sweden,Norway 6or7or8or9 Iceland,Korea,SouthAfrica 3