Question Details

Explain how regression analysis could be used for such a task



1. PPP and Economic Exposure. Boulder, Inc., exports chairs to Europe (invoiced in U.S. dollars)
and competes against local European companies. If purchasing power parity exists, why would
Boulder not benefit from a stronger euro?
2. Measuring Changes in Economic Exposure. Toyota Motor Corp. measures the sensitivity of its
exports to the yen exchange rate (relative to the U.S. dollar). Explain how regression analysis could be used for such a task. Identify the expected sign of the regression coefficient if Toyota
primarily exports to the United States. If Toyota established plants in the United States, how might
the regression coefficient on the exchange rate variable change?



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