Lecture 1 lecture notes

Lecture 1 lecture notes - Lecture 1 Introduction to...

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Lecture 1. Introduction to regression analysis Example 1. Question: Does The Canadian Dollar Go Up When Oil Prices Go Up? For more discission see: forex news, Bank of Canada reports etc. The explanation from Mike Moffatt, About.com: ”The reason why the Canadian Dollar goes up when oil prices go up and the U.S. Dollar goes down has to do with the fact that Canada is a next exporter of oil and the U.S. is a net importer. Oil is typically denominated in U.S. Dollars. When the price of oil goes up, so American firms increase the total dollars spent on oil from Canadian oil companies. The Canadians are left with a lot of U.S. Dollars, but they need to pay their workers, taxes, etc. in Canadian Dollars. The Canadian firms need to reduce their holdings of U.S. Dollars (in order to get Canadian Dollars), so they increase the supply of U.S. Dollars on foreign exchange markets. This shifts the supply curve to the right, causing the price of U.S. Dollars to fall.”
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