Research Findings

Of
“The Impact of Foreign Exchange Rate
on The Inflation of Bangladesh”

Course Title : International Economics II

Course Code : Econ 407

Submitted to

Syeda Sumaiya Habib

Assistant Professor
Department of Economics
Jahangirnagar University

Submitted by

Name Roll
Nadima Din 447
Najia Tasnim 452
Rubaiya Zahan Mim 453
Shahrin Siddika Chaity 454
Mst. Farhana Khatun 463
Rifah Tasfia Ishadi 468
Mst.Nazmin Akter 475
Shaloya Zabin 2244

46 Batch
Department of Economics
Jahangirnagar University

Submission Date: 13 April, 2022.

1
 Table of Contents
Page No.

List of Graphs, Tables and Acronyms……………………………………………….. .. 3

Abstract………………………………………………………………………………. 5

Introduction…………………………………………………………………………… 5

Methodology of the Study…………………………………………………………….. 7

Literature Review……………………………………………………...……………… 8

Data Analysis………………………………………………………………………….. 11

Result and Discussion…………………………………………………………………. 12

Policy Recommendations……………………………………………………………… 14

Conclusion…………………………………………………………………………… 15

Acknowledgement……………………………………………………………………. 16

References………………………………………………….…………………………. 17

Appendix……………………………………………………………………………… 19

2
 List of Graphs:

Graph No. Name Page No.

Fig 5.1
Regression Line. 12

Overall trend of monthly inflation rate in Bangladesh

Fig 1: Appendix A 19
for Past 10 years

Fig 2: Appendix A Overall trend of annual exchange rate in Bangladesh

19
for Past 10 years

 List of Tables:

Table No. Name Page No.

Table B.1: Appendix B The monthly data of exchange rate and inflation rate
20-21
from January 2018- February 2022

Table B.2: Appendix B

Deviation Values of the Regression Analysis 22-23

 List of Acronyms:

Acronyms/ Abbreviation Explanation

INF Inflation Rate

EXR Exchange Rate

BBS Bangladesh Bureau of Statistics

GDP Gross Domestic Product

FDI Foreign Direct Investment

3
 Acronyms/ Abbreviation Explanation

DSE Dhaka Stock Exchange

PPP Purchasing Power Parity

Turkish Lira Exchange Rates in terms of

TL/Pound rate, TL/Dollar, TL/Euro, TL/Yen
Pound rate, Dollar, Euro, Yen

STATA Statistical software for data science

ARCH Auto Regressive Conditionally Heteroscedastic

Generalized Auto Regressive Conditionally

GARCH
Heteroscedastic

4
 The Impact of Foreign Exchange Rate on
The Inflation of Bangladesh

Abstract

The foreign exchange rate seems to have an impact on the domestic

currency according to the very basic economic theory. In case of
Bangladesh, it has been more or less a steady ride considering the variation
in both the exchange rates and inflation rate over the recent years. With the
help of empirical data analysis, we found the exact relationship between
these two in case of Bangladesh. We have finalized the result based on
regression analysis concluding with interpretative remarks shortly.

Keywords: Inflation Rate, Exchange Rate, Interest Rate, Bangladesh Economy

I. Introduction

1.1. Background of the study

Bangladesh's economy is heavily dependent on foreign cash due to remittance, freelancing,

and export-import transactions. Bangladesh's rate of inflation in 2021 was 5.56 percent higher
than the previous year. Bangladesh's annual inflation rate increased to 6.17 percent in
February 2022, up from 5.86 percent the previous month. It was the highest rate of inflation
since October 2021, primarily to increasing food costs. Bangladesh Bank (Bangladesh Bank,
2022.)
At the same time, exchange rate has been varied from 84.80 TK/US$ to 86.00 TK/US$,
revealing the highest rate at February, 2022 (Bangladesh Bank, 2022). It shows both the
inflation rate and exchange rate has been increased, indicating a positive relationship between
the two.

1.2. Problem Statement

Inflation has been increasing in recent days as the prices of most commodities have increased
on global markets as a result of increased demand, comparatively high shipping costs, and
supply limits. For a developing country like Bangladesh, the exchange rate is critical in
international finance and trade. This is because currency rate changes have an impact on
multinationals' profitability and increase the risk of exchange for businesses and financial
institutions.
As a result, it can be said that the foreign exchange rate has an effect on the domestic
currency, i.e., the inflationary or deflationary scenario. We have tried to get to the bottom of
it with this study.

5
 1.3. Concrete Objectives of the Study

Main objectives of this paper are:

i. To see if the declining value of the Taka in recent years can be explained by the
movements in exchange rates.

ii. To investigate and analyze the impact of an increase in the inflation rate on the
change in the country’s exchange rate.

iii. To identify what changes Bangladesh might take to ensure a stable exchange rate,
rapid economic growth, and control inflation.

1.4. Rationale of the Study

A significant change in the exchange rate is almost certain to change the domestic pricing of
tradable goods. Changes in the pricing of tradable inputs eventually impact the prices of non-
tradable commodities as well. Changes in input prices can cause supply shocks, which can
lead to inflation. Exchange rates also influence FDI in countries, which has a further impact
on inflationary conditions. Studies show that inflation also leads to currency devaluation, i.e.
a decline in the trade-weighted nominal effective exchange rate. (Ben Cheikh, 2012)

1.5. Research Hypothesis

Marcelo Sanchez has shown in his 2005 research under European Central Bank that, the
foreign exchange and the rate of inflation have many common in-between factors, we expect
both the rate to be correlated and show a predictable regression line for the forecasting
purposes in future. In case of Bangladesh we are assuming this relationship to hold true.

1.6. Limitation

Firstly, our research demands data on inflation rates and currency exchange rates at the
national level. Therefore, we used secondary data from reliable and prominent national
sources. We didn't use any primary data and haven’t conducted any surveys or interviews for
our research purposes.

Secondly, the unavailability of data is the biggest limitation when it comes to secondary data
analysis. For the regression analysis, we wanted to work with 10 years of monthly data on the
exchange rate and inflation rate. Due to technical difficulties, we were unable to obtain the
exact rate of monthly inflation for a period of ten years. Instead, we were only able to obtain
the relevant data from the Bangladesh Bank database between January 2018 and February

6
2022. However, we were able to find an overall trend of the inflation rate in Bangladesh for
the past 10 years, which is added in Appendix A at the end of this paper.

II. Methodology of the Study

2.1. Approach of the Study

We have studied previous data from January 2018 to February 2022 and collected 50 entries
of the monthly inflation rate against the exchange rate of Bangladesh. Thus, we have
compared the foreign exchange rate scenario with the change in inflation..

2.2. Data Source

The main data source were secondary data collected from authorized websites of different
leading organizations like the World Bank, IMF, ADB, Bangladesh Bank, Bangladesh
Bureau of Statistics (BBS) and so on.

Secondary literature in the relevant field, such as standard national and international
publications, journals, government policy report bulletins, and so on, was studied for the
preparation of this paper, and websites of various writers on relevant themes were visited. An
intensive study was conducted on the process of collecting and analyzing this secondary data
to sort through the conclusion. Through content analysis and regression conducted on the
collected empirical data, we have gradually built the discussion over the following
consecutive sections.

2.3. Tools of Analysis

To analyze data and information, both qualitative and quantitative research approaches, such
as analytical statistical models like correlation and regression analysis and the statistical
software for data science (STATA), have been used. Correlation and regression models have
been used to examine the relationship between the exchange rate and inflation. Regression
analysis has been used to contemplate the comparison between datasets in order to establish
the trend revealing our intended correlations and interpret accordingly.

2.4. Structure of the Paper

The paper will be structured into seven parts:

a) Introduction
b) Methodology of the Study
c) Literature review
d) Data Analysis
e) Result and Discussion
f) Policy Recommendations and
g) Conclusion.

7
 I. Literature Review:

1.1. Case Study: Bangladesh

Bangladesh's experience transitioning from a currency board system to a floating regime

since 2003 is instructive. They discover that under fixed exchange rates, inflation levels and
variability are significantly lower. Inflation could not be kept under control, and between
1976 and 1980, it stayed above 10%. Between 2003 and 2006, the Taka lost 13% of its value
against the US dollar, while GDP growth stayed below 4%. In 2007 and 2008, inflation
appeared uncontrolled. (Siddiki, 2002) The influence of the exchange rate system on a
country's price level is extensive. (Hossain, 2002)
S. Mahzabeen (2017) worked with data of the Dhaka Stock Exchange (DSE) on 144 variables
during a period of twelve years, from January 2001 to December 2012. The Granger causality
test clearly demonstrates that the short-term interest rate has only a little association with the
long-term interest rate. When monetary policy is expansionary, debtors find investment
options less expensive and individuals with more money to spend, according to this study.
Inflation has an influence on the stock market because it reduces the buying power of money.
According to the report, Bangladesh's stock market is inefficient and does not respond to
changes in monetary factors such as broad money and interest rates. The percentage change
of the index is virtually unaffected by the money supply or inflation. When it comes to
establishing interest rates, the Bangladesh Bank should be more cautious. There were a
number of ideas that may be made to improve the market's efficiency. If this is done, the
chances of having an anomalous return will be reduced. (Mahzabeen, 2017)
Bangladesh's inflation rate was 6.6 percent in 1996 and 1.6 percent in 2001. Bangladesh's
current currency rate policy has suited the country well. Bangladesh, according to the study,
maintains an active exchange rate management within the context of an adjustable basket peg
regime. (Khan, 2021)

Literature Gap:
We haven't found any rigorous study focused on building direct relationship between the
inflation rate and exchange rate according to recent empirical data. However, similar study
focused on direct relationship has been found in case of other countries.

1.2. Case study: Other Countries

Flexible exchange rates, according to modern economists, give more protection from external
shocks. In 2001, Sri Lanka implemented a free-floating currency rate regime. The currency
rate volatility spiked immediately after the float, resulting in a huge fall of the Lanka rupee.
(Hossain, 2002)

8
Some nations, such as Canada and Malaysia, have lower inflation rates than Australia,
boosting their relative tourist pricing competitiveness. The US dollar, Canadian dollar,
French dollar, Turkish lira, Indonesian ringgit, Malaysian ringgit, and Chinese yuan yuan
yuan yuan yuan yuan Four Asian origin nations witnessed their domestic tourism become
more price competitive in contrast to international travel between 1993 and 1998. Exchange
rate reductions boosted the outcomes of the last three nations, while Japan's inflation rates
were considerably lower. This study looks into the viability of developing pricing
competitiveness indexes. (Dwyer, Forsyth, and Rao, 2002)
Many academics argue that transition nations should employ fixed exchange rates or peg
their currency rates to their primary trading partners' currencies. From 1996 to 2014, inflation
in Western Balkan nations was in the single digits. The empirical data on the exchange rate's
usefulness as a shock-absorbing device is inconclusive. The fundamental rationale for
maintaining a fixed exchange rate is because developing countries suffer from "fear of float"
(Edwards, 2006). From 1996 to 2014, inflation in Western Balkan nations was in the single
digits. The empirical evidence on the exchange rate's usefulness as a shock-absorbing device
is varied.

In the Czech Republic, Hungary, Poland, and Slovenia, Coricelli et al. (2005) found little
evidence of exchange rates acting as shock absorbers. Borghijs and Kuijs (2004) revealed that
exchange rates are a less efficient propagator of monetary and financial shocks in Central
European countries. A fixed exchange rate has a limited influence on output, and during the
crisis, growth remained stagnant. Exchange rate flexibility, according to Adler and Tovar
(2012), can reduce the impact of financial shocks. (Fetai, Koku, Caushi and Fetai, 2016)

If there are no significant short-term economic rewards, the approach might quickly disrupt
macroeconomic stability. In the Western Balkans, exchange rates have had a significant
impact on maintaining price stability. Before determining whether or not to establish a
flexible exchange rate system, the authors believe that authorities in the area should assess
the costs and advantages. Changes in the exchange rate have a considerable influence on
inflation, according to the study's major result. (Fetai, Koku, Caushi and Fetai, 2016)
For a long time, Turkey has endured high inflation. Following the 2001 crisis, the
government was able to reduce its inflation rate to a single digit by implementing significant
anti-inflation measures. Turkey's inflation was the 15th highest in the world at the end of
2014, while remaining in the single digits. In Turkey, the rate of inflation is particularly
significant. Inflationary pressures and big gains in foreign currency have increased the need
to learn more about their link. (Özen et al., 2020)
PPP variations are not random since ARCH and GARCH are incorporated in the link.
Instead, they follow a pattern. The disparity might be caused by a number of factors,
including transaction costs, government restrictions, product specialization, and other
pertinent factors. The focus of the investigations was on data from Turkey and the United
Kingdom. Other countries, such as the United States, Japan, and the European Union, may be
included in the study. In addition to the TL/Pound rate, the TL/Dollar, TL/Euro, and TL/Yen

9
rates may all be used to get the TL/Pound rate. This will help us to have a clearer idea of the
differences and their causes. (Özen, Özdemir and Grima, 2020)

1.3. General Observations:

The currency rate has a significant positive relationship with FDI in both the short and long
term. Inflation has a significant negative impact on FDI over time, but has minimal effect in
the short term. (Fetai, Koku, Caushi, and Fetai, 2016) Other nations might be included in the
research, such as the United States, Japan, and the European Union. You may compare the
TL/Dollar, TL/Euro, and TL/Yen rates instead of only the TL/Pound rate. This offers you a
more comprehensive understanding of the differences and what's generating them. Sri Lanka
adopted a free-floating exchange rate policy in 2001. (MANGIR, 2020)

Another study by Dwyer, Forsyth and Rao (2002) says, price differentials and exchange rate
movements are all part of the concept of competitiveness. Destinations vary in price
competitiveness due to varying buying behaviors of different kinds of visitors based on their
vacation intent. Price competitiveness indices may be used to track how a location's
competitiveness evolves over time. The pricing competitiveness of a tourism destination is
linked to travel reasons. Price competitiveness indices may be used to track how a location's
competitiveness evolves over time. Behind the price indices, little attempt was made to
explore the basic causes of price competitiveness or their impact on destination price
competitiveness over time. Price competitiveness indices may be used to investigate how
destination competitiveness changes over time and what influences it.

The studies found a positive relationship among GDP growth rate, exchange rate and export
in Bangladesh. It was observed that a 1% push in exchange rate and export value will result
into 844% and .163% increase in GDP respectively. (Islam, 2003)

10
 II. Data Analysis

This study is primarily based on secondary data. The monthly data of exchange rate and
inflation rate from January 2018- February 2022 are collected from Bangladesh Bank
database, which is detailed at the Appendix B in Table B.1.

2.1. Methodology and Hypothesis:

Simple regression analysis is applied in this study. Regression analysis investigates the causal
link between one or more independent factors and one or more economic variables to be
explained (the dependent variable). It enables us to spot trends and make predictions both
outside and within a set of data. We express our model as follows because of the relation
between exchange rate and inflation rate according to the hypotheses:

INF = β0 + β1 EXR + ui

INF (Inflation) is the dependent variable in this equation. The independent variable is EXR
(exchange rate), and the Intercept is β0. β1 is the equation's slope, and ui is the error term,
which has a normal distribution with a zero mean and constant variance.

The values of β0 and β1 will be calculated with the aid of STATA using the OLS method,
which is an ordinary least squares estimate approach. The F statistic's value is utilized to
determine the Inflation rate equation's overall relevance. At a certain significance level, such
as 10%, we compare the value of the F statistic with the critical value of F. We use the p
value to determine if the coefficient is significant statistically or not (if the value of the p is
less than the value of the significance level, we call it significant). Same can be done with the
t-statistic and critical value.

2.2. Specifying the Model:

The following is the economic model's estimated equation:

INF = β0 + β1EXR + ui

Ŷ = β0 + β1 X

β1 = SPxy /SSx = Σ(xi-x̄)(yi-ȳ)/ Σ(xi-x̄)2

And, β0 = ȳ - β1x̄
Deviation Values of the regression are added in Appendix B (Table B.2) with necessary
calculations [Eq. (B.1) & (B.2)].

11
 III. Result and Discussion:

3.1. Regression Result from STATA command:

. regress Inflation exchangerate

Source SS df MS Number of obs = 50

F(1, 48) = 3.69
Model .238812606 1 .238812606 Prob > F = 0.0607
Residual 3.10711576 48 .064731578 R-squared = 0.0714
Adj R-squared = 0.0520
Total 3.34592836 49 .068284252 Root MSE = .25442

Inflation Coef. Std. Err. t P>|t| [95% Conf. Interval]

exchangerate .0932795 .0485642 1.92 0.061 -.0043652 .1909243

_cons -2.278745 4.106653 -0.55 0.582 -10.53572 5.978234

We found our Regression line equation as: Ŷ = 0.09328X - 2.27876

Where, β1 = 0.09328 and, β0 = -2.27876

Fig 5.1: Regression Line.

12
 3.2. Interpretation of the Result:

i. Y and X relationship
R Square (R2) equals 0.0714. It means that 7.14% of the variability of Y is explained by X.

Correlation (R) equals 0.267. It interprets as a weak positive direct relationship between X
and Y.

ii. Goodness of fit

Overall regression: right-tailed, F(1, 48) = 3.69. p-value = 0.061. Since p-value < α (0.10),
we reject the H0 i.e. β1 ≠ 0.
t stat shows value of 1.92 which is greater than critical value of t, i.e. 1.67 at 10%
significance level when df = 49. This also conforms to the previous interpretation.

The linear regression model, Y = β0+ β1X + ui, doesn’t provide a better fit than the model
without the independent variable.

The Y-intercept: p-value = 0.582. β0 is significantly different from zero.

iii. Residual normality

For residual errors, the linear regression model prescribes normality. The data is expected to
be regularly distributed.

iv. Outliers

Residual outliers: Srs = √MSE = = 0.2544.

The residuals’ standard deviation:
Srs2 = 0.0647; low spread.
So, we can conclude that there are no outliers in the data.

3.3. Discussion:

The R2 obtained from the regression analysis in STATA is 0.0714, which is around 7.14
percent. Statistically, this econometric model is not a very good fit. In terms of economics,
this indicates that the exchange rate in Bangladesh is responsible for around 7.14 percent of
the overall fluctuation in the inflation rate.

13
Again, p-value (0.061) is lower than significance level (0.10), supported by t stat in a similar
fashion. As a result, we were able to establish a direct link between the two. Regression
results shows, if the exchange rate (EXR) is zero, Bangladesh's inflation is reduced by
approximately 2.28 percent.

According to economic theory and experience, it is expected that there will be a positive
relationship among inflation and exchange rate in Bangladesh, which in this regression came
true. In the estimated model the slope of exchange rate variable is 0.09328. This means that a
1% increase in exchange rate volume will cause rate of inflation to increase by 0.093%
approximately.

Based on economic theory and experience, there should be a positive association between
inflation and the exchange rate in Bangladesh, which was confirmed in this regression. The
exchange rate variable has a slope of 0.09328 in the calculated model. This suggests that a
1% rise in exchange rate volume will result in a 0.093 percent increase in the rate of inflation.

IV. Policy Recommendations

From above discussion where we could identify a weak correlation between inflation and
exchange rate, we can draw some following policy recommendations based on our study.
From the weak correlation, we can assume other factors are affecting the inflation rate.
Controlling some of them could give us an expected scenario. For example,

 Monetary Policy:

Higher interest rates can reduce the aggregate demand in the economy, resulting in reduced
economic growth and lower inflation.

i. According to money supply management, there is a near correlation between money

supply and inflation, and so inflation can be controlled by regulating the money
supply.

ii. Supply-side policies are those that aim to increase the economy's productivity and
efficiency while also lowering long-term costs.

iii. When a country has some excess leveled black cash, one of the monetary steps is the
demonetization of higher-denomination currencies.

14
  Fiscal Policy:

A higher tax rate on income could be used to reduce spending, demand, and inflationary
pressures.

i. By seeking to regulate wages, price limits may, in theory, contribute to reduce

inflationary pressures. Nonetheless, it was rarely used until the 1970s.

ii. The monetary and credit expansion of the Bangladesh Bank must be monitored
regularly.

iii. Policymakers should also make significant investments in productive activities that
would boost Bangladesh's exports and reduce its imports.

iv. Bangladesh's authorities should prioritize stable monetary and fiscal policy in the long
run.

v. Policymakers should also assure that resources are put to the best possible use through
the proper channels, such as technical education, better incentives, and motivation, in
order to achieve effective and efficient results.

Thus, inflation rate can be made stable within the country beyond the scope of
exchange rate. It's also notable that, if supply side globally doesn't face shocks or abundance,
keeping credit expansion at its pace we can ensure stability in the exchange rate scenario,
thus resulting in stable inflation rate according to our revealed function.

V. Conclusion

As we have expected according to our hypothesis, we could find out an exact or direct
positive relationship between the Exchange rate and Inflation rate in the perspective of
Bangladesh. It showed a weak correlation which interpreted into the additional factors
working behind the fluctuations in the inflation rate, other than exchange rate. These might be
the changes in valuation of other foreign currency, supply shock or unusual increase in
demand and so on. However, we haven't found rigorous study focused on building such
relationship between the two under the light of recent empirical data. In this way, our
research adds a unique value in building a direct relationship between exchange rate and
inflation rate within the monthly timeframe of 2018-2022 approximately.

15
 Acknowledgement

Without the help of our instructor, Syeda Sumaiya Habib, to accomplish this research paper
would not have been possible. Her guidelines, instructions, and attention to the detail have
been inspirational and have kept our work on track from the very beginning of the data
collection process right to the final copy of this paper.

16
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Bangladesh Bank. (z.d.). Bangladesh Bank. Geraadpleegd op 7 april 2022, van

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https://www.bb.org.bd/en/index.php/econdata/inflation
Bangladesh Inflation Rate - Forecast. (z.d.). Trading Economics. Geraadpleegd op 13 april

2022, van https://tradingeconomics.com/bangladesh/inflation-

cpi?embed/forecast#:%7E:text=Inflation%20Rate%20in%20Bangladesh%20is,accord

ing%20to%20our%20econometric%20models.

Ben Cheikh, Nidhaleddine. (2012). Asymmetric Exchange Rate Pass-Through in the Euro
Area: New Evidence from Smooth Transition Models. Economics: The Open-Access,
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Dwyer, L., Forsyth, P. and Rao, P., 2002. Destination Price Competitiveness: Exchange Rate
Changes versus Domestic Inflation. Journal of Travel Research, 40(3), pp.328-336.
Fetai, B., Koku, P., Caushi, A. and Fetai, A., 2016. The relationship between
exchange rate and inflation: the case of Western Balkans Countries. Pressacademia,
5(4), pp.360-364.
The Financial Express. (z.d.). Inflation climbs to 6.17pc indicating harsh food price in

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harsh-food-price-in-bangladesh-

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 Asia-Pacific Development Journal, 9(2), pp.1-15.
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Mahzabeen, S., 2017. Impact of Money, Interest Rate and Inflation on Dhaka Stock
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MANGIR, A., 2020. The Relationship between Inflation and Inflation Uncertainty: Empirical
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18
 APPENDIX

APPENDIX A: Background of the study

Fig 1: Overall trend of monthly inflation rate in Bangladesh for Past 10 years

Fig 2: Overall trend of annual exchange rate in Bangladesh for Past 10 years

19
APPENDIX B: Data Analysis

Table B.1:
The monthly data of exchange rate and inflation rate from January 2018- February 2022 are
collected from Bangladesh Bank database.

Month, Year Inflation Rate Exchange Rate

% (TK/ US$)
January 2018 5.88 82.9
February 2018 5.72 82.96
March 2018 5.68 82.96
April 2018 5.63 82.98
May 2018 5.57 83.7
June 2018 5.54 83.7
July 2018 5.51 83.75
August 2018 5.48 83.75
September 2018 5.43 83.75
October 2018 5.4 83.85
November 2018 5.37 83.9
December 2018 5.35 83.9
January 2019 5.42 83.95
February 2019 5.47 84.15
March 2019 5.55 84.25
April 2019 5.58 84.45
May 2019 5.63 84.5
June 2019 5.52 84.5
July 2019 5.62 84.5
August 2019 5.49 84.5
September 2019 5.54 84.5
October 2019 5.47 84.75
November 2019 6.05 84.9
December 2019 5.75 84.9

20
 January 2020 5.57 84.9
February 2020 5.46 84.95
March 2020 5.48 84.95
April 2020 5.96 84.95
May 2020 5.35 84.95
June 2020 6.02 84.85
July 2020 5.53 84.8
August 2020 5.68 84.8
September 2020 5.97 84.836
October 2020 6.44 84.8004
November 2020 5.52 84.8
December 2020 5.29 84.8
January 2021 5.02 84.8
February 2021 5.32 84.8
March 2021 5.47 84.8
April 2021 5.56 84.8
May 2021 5.26 84.8
June 2021 5.64 84.8
July 2021 5.36 84.804
August 2021 5.54 85.2
September 2021 5.59 85.5
October 2021 5.7 85.6667
November 2021 5.98 85.8
December 2021 6.05 85.8
January 2022 5.86 86
February 2022 6.17 86

21
Table B.2:.Deviation Values of the Regression Analysis used in calculation
Mx= Mean value of X = x̄
My= Mean value of Y = ȳ

X - Mx Y - My (X - Mx)2 (X - Mx)(Y - My)

-1.6581 0.2712 0.2712 -0.4497

-1.5981 0.1112 0.1112 -0.1777
-1.5981 0.0712 0.0712 -0.1138
-1.5781 0.0212 0.0212 -0.0335
-0.8581 -0.0388 -0.0388 0.0333
-0.8581 -0.0688 -0.0688 0.059
-0.8081 -0.0988 -0.0988 0.0798
-0.8081 -0.1288 -0.1288 0.1041
-0.8081 -0.1788 -0.1788 0.1445
-0.7081 -0.2088 -0.2088 0.1479
-0.6581 -0.2388 -0.2388 0.1572
-0.6581 -0.2588 -0.2588 0.1703
-0.6081 -0.1888 -0.1888 0.1148
-0.4081 -0.1388 -0.1388 0.0567
-0.3081 -0.0588 -0.0588 0.0181
-0.1081 -0.0288 -0.0288 0.0031
-0.0581 0.0212 0.0212 -0.0012
-0.0581 -0.0888 -0.0888 0.0052
-0.0581 0.0112 0.0112 -0.0007
-0.0581 -0.1188 -0.1188 0.0069
-0.0581 -0.0688 -0.0688 0.004
0.1919 -0.1388 -0.1388 -0.0266
0.3419 0.4412 0.4412 0.1508
0.3419 0.1412 0.1412 0.0483
0.3419 -0.0388 -0.0388 -0.0133
0.3919 -0.1488 -0.1488 -0.0583
0.3919 -0.1288 -0.1288 -0.0505
0.3919 0.3512 0.3512 0.1376
0.3919 -0.2588 -0.2588 -0.1014
0.2919 0.4112 0.4112 0.12
0.2419 -0.0788 -0.0788 -0.0191
0.2419 0.0712 0.0712 0.0172
0.2779 0.3612 0.3612 0.1004
0.2423 0.8312 0.8312 0.2014
0.2419 -0.0888 -0.0888 -0.0215

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 0.2419 -0.3188 -0.3188 -0.0771
0.2419 -0.5888 -0.5888 -0.1424
0.2419 -0.2888 -0.2888 -0.0698
0.2419 -0.1388 -0.1388 -0.0336
0.2419 -0.0488 -0.0488 -0.0118
0.2419 -0.3488 -0.3488 -0.0844
0.2419 0.0312 0.0312 0.0075
0.2459 -0.2488 -0.2488 -0.0612
0.6419 -0.0688 -0.0688 -0.0442
0.9419 -0.0188 -0.0188 -0.0177
1.1086 0.0912 0.0912 0.1011
1.2419 0.3712 0.3712 0.461
1.2419 0.4412 0.4412 0.5479
1.4419 0.2512 0.2512 0.3622
1.4419 0.5612 0.5612 0.8092
Sum=0 Sum=0 SS= 27.4463 SP= 2.5602

SSx =27.4463,
and SPxy = 2.5602

Calculation:
Ŷ = β0 + β1 X
Eq. (B.1):
β1 = SPxy /SSx
= Σ(xi-x̄)(yi-ȳ)/ Σ(xi-x̄)2

β1 = 2.5602/ 27.4463
= 0.09328
Eq. (B.2):
β0 = ȳ - β1x̄
x̄ = 84.56,
ȳ = 5.61

β0= 5.61 - (0.09*84.56)

= -2.27876

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