The cruise ships are very profitable. You want to measure Bag’s economic exposure to movements in the peso by applying regression analysis to data over the last 60 quarters: SP = b0 + (b1 x e) + u

Bag Company of the U.S. has a business of offering cruises along the coast of Argentina that are solely for American tourists. The cruise ships charge American tourists in U.S. dollars but all of their expenses such as payments to its employees are in Argentine pesos. The cruise ships are very profitable. You want to measure Bag’s economic exposure to movements in the peso by applying regression analysis to data over the last 60 quarters:

SP = b0 + (b1 x e) + u

The cruise ships are very profitable. You want to measure Bag’s economic exposure to movements in the peso by applying regression analysis to data over the last 60 quarters:

SP = b0 + (b1 x e) + u. Do you think the expected sign of the b1 coefficient in the model above would be positive and significant, negative and significant, or zero (not significant)? Briefly explain.

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