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Re: st: first-difference regression

From   Christopher Baum <[email protected]>
To   "[email protected]" <[email protected]>
Subject   Re: st: first-difference regression
Date   Wed, 28 Sep 2011 04:02:20 -0400

On Sep 28, 2011, at 2:33 AM, donsaane wrote:

> When you run a first- difference method, do you always
> put : noconstant ?  For example : reg dx dy, noconstant, or
> you just run it like OLS . eg : reg dx dy
> Because I read an article and they put «noconstant» , so I
> want to know if when we run a first difference, we always put «noconstant»

If you write down a linear model in levels and take first differences, the constant disappears.
If one of the regressors is a time trend, its difference is constant, and your FD regression will have a constant term.
If you do not believe there should be a trend in the level equation, then you should not use a constant in the FD equation.


Kit Baum   |   Boston College Economics & DIW Berlin   |
                              An Introduction to Stata Programming  |
   An Introduction to Modern Econometrics Using Stata  |

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