I am have some questions about how to detrend a series with a deterministic trend and how to apply it in Eviews. Can someone check if my process is correct?
Let's say I want to regress a variable Yt on a variable Xt, but Xt exhibits a deterministic trend.
To detrend Xt, I run a regression on a time index variable, TIME. Would my Eviews command would be: ls x TIME
I then obtain the estimated residuals from the above regression, ut. Now do I use this new series, ut as my regressor for my original equation? So I would then estimate the following: ls y c u
Linear Detrend
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 Nonnormality and collinearity are NOT problems!
 Posts: 3551
 Joined: Wed Sep 17, 2008 2:25 pm
Re: Linear Detrend
Amaziah wrote:I am have some questions about how to detrend a series with a deterministic trend and how to apply it in Eviews. Can someone check if my process is correct?
Let's say I want to regress a variable Yt on a variable Xt, but Xt exhibits a deterministic trend.
To detrend Xt, I run a regression on a time index variable, TIME. Would my Eviews command would be: ls x TIME
I then obtain the estimated residuals from the above regression, ut. Now do I use this new series, ut as my regressor for my original equation? So I would then estimate the following: ls y c u
Almost, the first step needs a constant
Code: Select all
ls x c TIME
Re: Linear Detrend
Okay. Now the residuals that are obtained are considered the detrended series?

 Nonnormality and collinearity are NOT problems!
 Posts: 3551
 Joined: Wed Sep 17, 2008 2:25 pm
Re: Linear Detrend
Yep.
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