Question Given Japan (developed country) and India (developing country) . Use long trend time series data (10 years) to test (simple statistical hypothesis testing is required) whether: 1.The...

Question

Given Japan (developed country) and India (developing country) . Use long trend time series data (10 years) totest(simple statistical hypothesis testing is required) whether:

1.The interest parity condition holds between those countries.

2.Relative purchasing power parity holds for the countries’ exchange rates.

Note:

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Time series of inflation, exchange rates and interest rates of at least 10 years. Remember that the frequency of all these variables can be obtained on a monthly basis so that you have more data points.

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Expected future exchange rate can be taken to be the Spot of the future date.

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Basic regression analysis simply using excel or any other package must be used in answering the questions.