question help 4c

You work for a Tunisian Investment bank. You have available the following quarterly rate series in the US, IUsD and in Tunisia ITND from 2019:4 to 2020:3. The TND/USD in 2019:4 is 1.1646. You are expected to do quarterly out of sample forecasts of the TND/USD exchange rate for the period 2020:1 to 2020:3 using the Interest rate parity formula. The firm uses the following forecasting regression model to forecast interest rates: ITND,t=0.0060+0.97ITND,t1+ Interest rates are detailed as follows in the table below Generate out of sample forecasts for the period 2020:1 to 2020:4 [8 Marks] 1) Give a detailed outline of the issues that are considered in the eight step forecasting process [4 Marks]