14.4 The forecaster in Exercise 14.2 augments her AR(4) model for IP growth to include four lagged values of Rt, where Rt is the interest rate on 3-month U.S. Treasury bills (measured in percentage points at an annual rate).

a. The Granger-causality F-statistic on the four lags of Rt is 4.16. Do interest rates help predict IP growth? Explain.

b. The researcher also regresses Rt on a constant, four lags of Rt and four lags of IP growth. The resulting Granger-causality F-statistic on the four lags of IP growth is 1.52. Does IP growth help to predict interest rates? Explain.