C10 Use the data in INTQRT.RAW for this exercise. (i) Using the data from all but the last four years (16 quarters), estimate an AR(1) model for r6t . (We use the difference because it appears that r6t has a unit root.) Find the RMSE of the one-step-ahead forecasts for r6, using the last 16 quarters. (ii) Now, add the error correction term sprt1  r6t1  r3t1 to the equation from part (i). (This assumes that the cointegrating parameter is one.) Compute the RMSE for the last 16 quarters. Does the error correction term help with out-of-sample forecasting in this case? (iii) Now, estimate the cointegrating parameter, rather than setting it to one. Use the last 16 quarters again to produce the out-of-sample RMSE. How does this compare with the forecasts from parts (i) and (ii)? (iv) Would your conclusions change if you wanted to predict r6 rather than r6? Explain.