An ARIMA (1, 1, 0) model (AR(1) model for first differences) is fit to observations of a time series. The first 12 residual autocorrelations are shown in Figure P-6. The model was fit with a constant.
Figure P-6
Autocorrelations for the Residuals of an ARIMA (1, 1, 0) Model

a. Based on an inspection of the residual autocorrelations, does the model appear to be adequate? Why or why not?
b. If you decide the model is not adequate, indicate how it might be modified to eliminate any inadequacy.

Residual Autocorrelations: ARIMA(1,1, 0) 1.0 0.8 c 0.6 0.4 0.2 E 0.0 -0.4- -0.6 0.8 12 Lag Corr T LBO Lag Corr T LBO 8 0.04 0.22 31.72 9-0.18 -0.86 33.72 1 0.21 -1.512.40 2 -0.53 3.65 18.07 3 0.20 .12 20.37100.23-1.10 37.11 4 0.28 150 24.77 5 -0.23-1.20 27.9112 0.20 0.94 44.30 6 -0.08-0.41 28.31 7 023 1.16 31.59 11 025 19 41.40