If a unit root exists,then
A)there is no issue with estimating time-series models.
B)steps must be taken to make the time-series a stable AR(1).
C)it is impossible to model the AR(1)process.
D)the time-series is not an AR(1)process.

Question

Quizplus · Accepted Answer

If a unit root exists, it means that the time-series is non-stationary and has a trend. In this case, it is not appropriate to estimate time-series models directly. Instead, we need to transform the series by differencing it to make it stationary. In the case of an AR(1) process, differencing can transform it to a stable AR(1). Therefore, steps need to be taken to make the time-series a stable AR(1).

If a Unit Root Exists,then