IMFEasyStatistics & Probability00:00Welcome to your interview for the Financial Analyst role at IMF.
The question is on your right: Inflation and Interest Rate Relationship. Take a moment with it first.
Talk your thinking through with me if you like - when you're confident, submit your answer and I'll grade it like a real screen. You have three graded attempts to score 7/10 or better.
NorthBridge Capital is reviewing whether central bank policy rates move in line with inflation. The research team wants a simple statistical analysis using recent monthly macro data.
Use the data below to quantify and test the relationship between monthly inflation and the central bank policy interest rate. Treat inflation as the explanatory variable and interest rate as the response variable.
| Month | Inflation Rate (%) | Policy Interest Rate (%) |
|---|---|---|
| 1 | 2.1 | 2.4 |
| 2 | 2.3 | 2.5 |
| 3 | 2.5 | 2.7 |
| 4 | 2.8 | 2.9 |
| 5 | 3.0 | 3.1 |
| 6 | 3.4 | 3.5 |
| 7 | 3.6 | 3.7 |
| 8 | 3.9 | 4.0 |
| 9 | 4.1 | 4.2 |
| 10 | 4.4 | 4.5 |
| 11 | 4.6 | 4.8 |
| 12 | 4.9 | 5.0 |
Assume these 12 monthly observations are an independent sample for this exercise. Test significance at .