I have estimated a multivariate regression line using OLS, and all 3 variables were found to be statistically significant.

$$d(NER)=.75+.08\times d(CA)+.002\times d(TB)-.003\times d(OFR)$$

Here, $NER=$ Nominal Exchange Rate (in No. of local currency exchange with $\$$1 USD), $CA=$ Net Capital Inflows, $TB=$ Trade Balance, $OFR=$ Official reserve stock, and expressed in the regression in I(1) form, i.e. $d(NER)$, $d(CA)$, $d(TB)$ and $d(OFR)$.

I have confusion that how to interpret variable coefficients where those are expressed in first difference variables, i.e. I(1).

How should I start with ... ? Either:

  • 1% change in net capital flows result 0.08% change in NER
  • 1 unit change in net capital flows result 0.08 change (in units) in NER

Also, how can I interpret changes in first difference variable $CA, TB, OFR$ ...??


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