The Federal Reserve Bank of St. Louis publishes selected interest rates and U.S. financial data on its website: http://research.stlouisfed.org/fred2/.

Consider the monthly 1 -year and 10 -year Treasury constant maturity rates from April 1953 to October 2009 for 679 observations; see the file m-gs1n10 . txt. The rates are in percentages.

(a) Let \(c_{t}=r_{t}-r_{t-1}\) be the change series of the monthly interest rate \(r_{t}\). Build a bivariate autoregressive model for the two change series. Discuss the implications of the model. Transform the model into a structural form.

(b) Build a bivariate moving-average model for the two change series. Discuss the implications of the model and compare it with the bivariate AR model built earlier.