Consider the following portion of data on y and x.

t........................y............... x

1...................18.23.......... 17.30

2................... 19.82......... 16.05

⋮......................... ⋮............... ⋮

12................... 22.75.........13.66

a. Estimate yt = β0 + β1xt−1 + εt , to make a one-stepahead forecast for period 13.

b. Estimate yt = β0 + β1yt−1 + εt , to make a one-stepahead forecast for period 13.

c. Which of the above models is more appropriate for forecasts? Explain.