Statistical Analysis on Relationship Between Malaysia Currency’s Exchange Rate and Some Econometric Variables

Neoh, Chee Seng (2018) Statistical Analysis on Relationship Between Malaysia Currency’s Exchange Rate and Some Econometric Variables. Final Year Project (Bachelor), Tunku Abdul Rahman University College.

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Abstract

This project investigates the linear relationship between Malaysia’s currency exchange rate and some econometric variables which include Malaysia’s lending interest rate, US’s lending interest rate, inflation rate and crude oil price by multiple linear regression analysis. First, chapter 1 introduces the definition of exchange rate, economy background of Malaysia, objectives and project scope. Chapter 2 studies the history of regression and the investigation done by different researcher that related to the influences of these econometric variables on the currency exchange rate of different countries. Chapter 3 discusses all the methods and formulas which are applied during data analysis. Moreover, data that gathered from Internet and the definition of each variables also include in this chapter. Chapter 4 presents the data analysis of this project. Beginning part is the correlation of each predictors against dependent variable. The following section is the analysis of the first model by least square method and determine the significance of each independent variable by F-test. Then comparison of the first model with another two different linear model is applied to determine the suitable model for this investigation. Two required statistical tests which are Multicollinearity Test and Normality Test are applied in order to ensure that the model has fulfilled the assumptions of regression analysis so that can improve the reliability. Lastly, the final model is used to forecast value of Ringgit Malaysia based on values of associated variables. The final chapter discusses the conclusion and some recommended future works which help to improve the overall project in future.