In an Autoregressive (AR) Model of order 1, AR(1), the stability condition requires:
1) The coefficient on the lagged value of the dependent variable to be less than 1 in absolute value.
2) The residuals to be uncorrelated with past values of the dependent variable.
3) The AR(1) model will be stationary if the absolute value of the lagged coefficient is greater than 1.
Which of the following options is correct?
1
Only statements 1 and 2 are correct
2
Only statements 1 and 3 are correct
3
Only statement 1 is correct
4
Only statements 2 and 3 are correct
5
Question Not Attempted