Determine the relationship between two variables

[popovic]

Dear all

I want to determine the relationship between the Australian Dollar and the Oil Price in Eviews.

I have quarterly data on the Australian-US dollar exchange rate, the Oil price and Australian and American interest rates and share markets for the past 25 years.

The data will require cleaning before it can be loaded into Eviews.

My questions are:

1- How can i clean the data?

2- How can i determine the relationship between the Australian Dollar and the Oil Price? in Eviews


Kind regards,

[startz]

Presumably, this is a homework assignment of some sort. If you want hints, you are going to have to be much more specific about what you mean by cleaning the data and what you mean by "relationship."

[popovic]

Thanks for your reply Startz

Do i need to transform the data?
And the meaning of relationship is that " does the variables affect each other / is Australian Dollar affected by oil price? / if there a relationship, is it positive or negative?"

To be more specific, what model i need to estimate in Eviews to get the Ansewrs.

[dakila]

First, you need to consider VAR model. Then identify exchange rate and oil shocks. The impulse response function will give you the answer.

[startz]

You may well need to transform data, for example to make it stationary. But no one can tell you without investigating the specifics. As has been suggested, a VAR is one approach. But you will need to think about what is meant here by "cause," in particular how you want to treat simultaneity.