# The following represents an exchange rate equation for Turkey for the period 1998Q1 2008Q1 which constitutes a sample of size 41. The equilibrium real exchange rate is determined to be a function of real or fundamental variables including terms of trade, openness (measured as the summation of exports and imports), capital flows and investment. Evaluate the regression. Talk about significance of coefficients, overall fit and multicollinearity. XRATE Coefficient Std. Error С INV TOT OPEN KFLOWS -2.212227 -0.668976 -0.167810 -0.547617 -1.061182 0.392960 0.181979 0.754391 0.270845 0.428852 R-squared Adjusted R-squared F-statistic 0.670392 0.633769 18.30518 Correlation Matrix XRATE INV TOT KFLOWS OPEN XRATE 1.000000 0.487101 -0.542737 0.634318 0.560235 INV 0.487101 1.000000 0.075865 0.528896 0.007661 TOT -0.542737 0.075865 1.000000 -0.297885 -0.898218 KFLOWS 0.634318 0.528896 -0.297885 1.000000 0.321189 OPEN 0.560235 0.007661 -0.898218 0.321189 1.000000

The following represents an exchange rate equation for Turkey for the period 1998Q1 2008Q1 which constitutes a sample of size 41. The equilibrium real exchange rate is determined to be…