Statistics Solutions

(See Steps) According to the Quantitative Theory of Money, inflation will be positively related to the rate of monetary growth, and inversely related to the


Question: According to the Quantitative Theory of Money, inflation will be positively related to the rate of monetary growth, and inversely related to the rate of real economic growth.

It analyzes the following information on the average annual rates of inflation, the average annual rate of money growth, and the average annual rate of growth in real GDP in 16 Latin American countries during the 1950-69 period.

Country Inflation y Money Growth X1 PIB growth
real X2
Argentina 26.4 24.6 2.4
Bolivia 41.3 41.6 3.0
Brazil 35.1 38.2 3.9
Chile 28.2 35.2 4.6
Colombia 9.2 16.5 5.4
Costa Rica 1.9 9.0 5.7
Ecuador 3.0 8.8 4.7
El Salvador 0.3 3.5 4.6
Guatemala 1.1 5.9 3.9
Honduras 2.1 8.0 4.0
México 5.3 11.3 6.9
Nicaragua 3.4 8.6 3.7
Paraguay 12.5 15.4 5.5
Perú 8.5 13.4 5.7
Uruguay 43.0 40.1 0.7
Venezuela 1.1 7.9 6.8

Answer the following:

  1. Estimate the multiple linear regression model to explain the annual inflation rate through the rate of money growth and growth in real GDP.
  2. How much does the annual inflation rate change on average for a 1% increase in the annual rate of money growth? How much does the annual inflation rate change on average for a 1% increase in the annual rate of growth in real GDP?
  3. Observing the multiple linear correlation matrix, what is the variable that has a greater linear relationship on the annual inflation rate?
  4. What is the fit of the model? In this case, which one is more advisable to use, the R2 or R2 - adjusted and why?

Price: $2.99
Solution: The downloadable solution consists of 3 pages
Deliverable: Word Document


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