Principles of Statistics In-Module Assessment Coursework

Principles of Statistics In-Module Assessment - Coursework ExampleThe period over which the exchange ordinate is observed is January, 1973 to January 2013. Annual observations argon used for each year, a single value of the exchange rate is observed. Thus, there are 43 annual observations on the exchange rate in the sample of data. Before turning to the specific characteristics of the series, it whitethorn be useful to take down the significance of forecasting foreign exchange rates. For any economy that is spread to international trade, the foreign exchange rates play important roles in deciding policies governing approximately of the important macro-economic variables in the economy. Particularly since the sm in all town of most international transactions occur within a short future horizon, the exchange rates likely to be applicable at the time of settlement assumes importance. The order of the associated cash flows in terms of the domestic currency are evaluated by using f oreign currency conversions. And these conversions are obtained by denominating the domestic currency by the foreign currency of the trade follower through the foreign exchange rate for the pair of countries (Taylor 1995). ... Since the natural logarithm is a monotonic transformation, all dynamic properties of the series are preserved, only the scale of the magnitude is smaller. Figure 1 The exchange rate between the Japanese Yen and the US Dollar The first and foremost point to be state is that the price of the Dollar has exhibited a downward trend over the time horizon under consideration. scratch at slightly above 5.8 in 1971, the value of the series has ended at around 4.6 in 2013. However, the series has not continuously subsided. It has exhibited periods of up(a) movements as well as downward movements. The length and magnitude of the downward movements however, dominate the trend. As a result, the overall trend of the series is that of a sort out. A immediate look reve als that the series exhibits a particular persistence a downward movement continues for a hardly a(prenominal) years as does an upward movement. That is, once a dip starts, it persists for a few years. Similarly, once an upward swing starts, it seems to persist for a few years. This pattern of persistence will become important in the forecasting phase. It should also be noted that the bonny length of the persistence of upswings is visibly smaller than the average length of the downswings. This pattern is particularly clear for the years after 1985. The other pattern worthy of note is that the overall magnitude of increases in the exchange rate over periods of appreciation is smaller than the observed magnitudes of decline in the exchange rate during periods of decreases. Barring the years between 1977 and 1983, this holds true for every period of decline and period of increase. Therefore, the observed pattern of decline in the Japanese price of the US dollar is explained by two