I got stuck to find the variance of the following AR(1) process. It looks really simple but I just can't solve it.
The process is
$x_{t+1}$ = a + b$x_{t}$ + c$\sqrt{x_{t}}$$\epsilon_{t+1}$
where $\epsilon_{t+1}$ is normal N(0,1)
This is where I get stuck. In order to calculate the variance, I solve
Var(x) = $b^2$Var(x) + $c^2$Var($\sqrt{x_{t}}$)
Then I am not sure how to compute Var($\sqrt{x_{t}}$)
Any tips or hints would be greatly appreciated!