Question: The data provided in https://www.wiky.corn/college/ashenfelter contain information on the un-employment rate (monthly and seasonally adjusted) from 1951 through 1999 with a year variable.
a. Estimate an AR(I) model. Test for first-order serial correlation. Conduct the estimation excluding the three most recent years. Using the models parameter estimates, perform an "in-sample" prediction for those three periods. How well does the model do?
b. Repeat part (a) using an AR(2) model. Which model do you prefer?