Is the following model stationary?

(6.58)

In order to test this, first write yt−1 in lag operator notation (i.e., as Lyt

), and take this term over to the LHS of equation (6.58), and factorise

(6.59)

(6.60)

(6.61)

Then the characteristic equation is having the root z = 1, which lies on, not outside, the unit circle. In fact, the particular AR(p) model given by equation (6.58) is a non-stationary process known as a random walk (see Chapter 8).