One thing that is really confusing me is in the text it states that:

“… the FX rate is a random walk, as we now suspect. If so, the first differenced series will be covariance stationary.”

Elsewhere is also says that:

“… modelling the first-differenced time series with an AR(1) model does not help us predict the future, as b_{0}=0 and b_{1}=1.”

Does this mean that if you first difference a series and b_{0}=0 and b_{1}=0 then the original time series is a random walk, but if b_{0}=0 and b_{1} is not equal to 0 it isn’t? AAAGH!