Trend component in d(log...) possible?

[Veuve]

Hi to all!

variable: Currency in circ.

- I run a Unit root test on Cur_sa, Not sig in level BUT sig in first diff. --> (dlog(cur_sa))
- In order to capture some outliers I introduce 3 dummy variables
- If I now add some trend components (@trend @trend^2) the residual seems to get better.

dlog(cur_sa) c @trend @trend^2 v1 v2 v3

How is this possible? I thought that if I run a model in first diff. I can not apply any trend component?! :?

Kind regards

[Veuve]

To all who are interessed.

The answer is YES you can use a trend componend while working with a model in first differences.