# We are trying to estimate the relationship between the percentage change of housing price and expected interest rates Aln(Housing Pricet ) = a +…

(i) Write out the estimated equation and the adaptive expectation process.

(ii) Which one is the best model among the three and Why?

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6. We are trying to estimate the relationship between the percentage change of housing price andexpected interest ratesAln(Housing Pricet ) = a + Btbillt + utexpectations.using three methods including lagged interest rates, rational expectations, and adaptiveMethod #1: Lagged interest rateAln(Housing Pricet ) = a + Btbillt-1 + utgen lagged_tbill=tbill[_n-1](1 missing value generated)reg house_price_pc lagged_tbillSourceSSdfMSNumber of obs150ModelF (1, 148)0. 981 . 6882984611 . 68829846Prob &gt; FResidual255 . 1210250. 3240148 1. 72379071R-squared0. 0066Adj R-squared=-0. 0001Total256. 809324149 1. 72355251Root MSE1 . 3129house_pric~cCoef.Std. Err.tP&gt; Itl[95% Conf. Interval]lagged_tbill-. 0241792. 024432-0. 990. 324-. 07245988251442. 1692795. 0241015cons4.870. 00049062711 . 159661