A Comparative Study of the Impact of Dummy Variables on Regression Coefficients and Canonical Correlation Indices: An Empirical Perspective

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Nsisong Ekong
Imoh Moffat
Anthony Usoro
Iseh Matthew

Abstract

In this paper, the impact of dummy variables on regression coefficients and canonical correlation indices from an empirical perspective is investigated. To do this, a regression analysis of Crude Oil Prices on US dollars - Naira Exchange Rates is performed, and the extent of the significance of the relationship is noted. Secondly, dummy variables (coded with respect to various economic regimes of interest) is introduced into the regression of the two variables and the impact of such introduction is also noted. And also, a canonical correlation analysis (CCA) of Inflation rate, the dummy variables and Crude Oil Prices and the dummy variables is conducted. Finally, we compare the significant role of the introduction of the dummy variables on the coefficients of the regression and the canonical correlation indices. The results showed that the introduction of dummy variables impact more on the canonical correlation indices than it does on the regression coefficients.

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