Regression

Analysis
Problem ?

 Exchange rates can have a significant impact on global trade, investment,

and economic growth.
 By analyzing exchange rate data, we can better understand the factors that
influence exchange rates and make informed decisions about investments and
trade.
 The problem we're trying to solve is to identify the variables that have the
most significant impact on exchange rates and to use this information to
predict future exchange rates.
MAJOR FACTORS AFFECTING
EXCHANGE RATE
 Public debt: This refers to the total amount of debt owed by the government
of Pakistan to its creditors. A high level of public debt can signal to investors
that a country is at risk of defaulting on its loans, which can lead to a
decrease in the value of its currency.
 Inflation rate: This measures the rate at which the general level of prices for
goods and services is rising in an economy. High inflation rates can lead to a
decrease in the value of a country's currency as it becomes less attractive to
foreign investors.
 Interest rate: This is the rate at which the central bank of Pakistan lends
money to commercial banks. Higher interest rates can make a country's
currency more attractive to foreign investors, as they can earn a higher
return on their investments.
 Balance of payments: This is the difference between a country's exports and
imports of goods and services, as well as other financial transactions with
other countries. A deficit in the balance of payments can lead to a decrease
in the value of a country's currency, as it indicates that more money is
flowing out of the country than is coming in.
 Current account deficit: This is a specific component of the balance of
payments that measures the difference between a country's exports and
imports of goods and services. A current account deficit can lead to a
decrease in the value of a country's currency as it signals that the country is
relying on foreign capital to fund its consumption.
 Changes in economic growth, political stability, and global economic conditions
can all impact the exchange rate of Pakistan.
Regression ?
 A statistical method used to analyze the relationship between a dependent
variable and one or more independent variables. The goal of regression analysis is
to understand how the independent variables are related to the dependent
variable and to create a model that can predict the value of the dependent
variable based on the values of the independent variables.
 It is a powerful tool for understanding how different factors are related to a
particular outcome and for predicting future outcomes based on historical data.
 R-squared value: (Coefficient Of Determination)The R-squared value is a
statistical measure that represents the proportion of the variation in the
dependent variable . a higher value indicating a better fit between the
independent variables and the dependent variable.
 Coefficients: In a regression, coefficients represent the size and direction of
the relationship between the independent variables and the dependent
variable.
A positive coefficient indicates a positive relationship (i.e., as the independent
variable increases.
 Significance levels: The significance level (also known as the p-value) is a
measure of how confident we can be that the relationship between each
independent variable and the dependent variable is not due to chance. If the
p-value for an independent variable is less than 0.05, we can conclude that the
relationship between that variable and the dependent variable is statistically
significant
 DATA:-
“2002 – 2022(Pakistan)”
 Will be using multiple regression analysis to determine the
relationship between exchange rates and other variables.
 The model will include variables such as inflation, interest rates, and
GDP , Public Debt , Balance of payments.
Thank You