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Assignment 1

The assignment investigates the relationship between crude oil prices and inflation rates using time series data over a period of at least 10 years. It tests the null hypothesis that oil prices have no significant effect on inflation against the alternative hypothesis that they do. A simple linear regression model will be implemented to analyze the data and draw conclusions.

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Jay Vora
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4 views2 pages

Assignment 1

The assignment investigates the relationship between crude oil prices and inflation rates using time series data over a period of at least 10 years. It tests the null hypothesis that oil prices have no significant effect on inflation against the alternative hypothesis that they do. A simple linear regression model will be implemented to analyze the data and draw conclusions.

Uploaded by

Jay Vora
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Assignment 1

Vora Jay Bhaveshbhai (21D100023)

Topic Name: Effect of Oil Prices on Inflation Rate

Objective:

To estimate the relationship between changes in crude oil prices and the inflation rate over time.

Hypothesis:

• Null Hypothesis (H₀): Crude oil prices have no significant effect on the inflation rate.

• Alternate Hypothesis (H₁): Crude oil prices significantly influence the inflation rate.

Data Type:

Time Series Data

Variables:

• Dependent Variable: Inflation rate (quarterly using CPI).

• Independent Variable: Crude oil prices (quarterly average price).

Frequency/Fidelity of Data:

• Frequency: Quarterly data.

• Time Frame: At least 10 years to capture trends and variations.

Data Source:

• Crude oil prices: CRUDEOIL commodity data NSE.

• Inflation data: Reserve Bank of India (RBI).

Model Used:

Simple Linear Regression (OLS)

Why SLR?

• Captures the direct relationship between crude oil prices and inflation.

• Assumes a linear effect of oil price changes on inflation, making it simple to implement and
interpret.

Implementation Steps:

1. Plot crude oil prices and inflation rates over time to observe trends.

2. Fit a simple linear regression model where in MS Excel:

o Dependent Variable = Inflation Rate

o Independent Variable = Crude Oil Prices


3. Evaluate the model using metrics like R² and the p-value of the coefficient to test
significance.

Inference:

This project provides actionable insights into how commodity prices influence macroeconomic
indicators, using a simple model.

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