finding trend lines with economic data?

[Josh Bozeman]

Perhaps someone can explain this to me...I am a student in economics, and I'm in forecasting class using where stata is the main software we use. This week, we are looking at real US GDP, potential GDP, etc. We are asked, in homework, to plot GDP and its trend. My question is- what precisely is the trend line? How is it measured by stata? How precisely do I add it? I think you have to run a regression first then secondly do post estimation analysis? Am I even close? In my data, all I have is "time" in years and real us gdp as the two variables. With just that- isn't the regression merely time on the left hand side and real US gdp on the right? Is there an easy way to describe what you're even regressing? That is- what does it mean to test if GDP explains time as a variable? And, again how does stata determine the trend line with just that data?

Any help would be awesome if it's not too much of a pain to easily explain.

Thanks all.

[Clyde Schechter]

It is customary on Statalist not to provide help with homework assignments. And, even barring that, interpreting a homework problem sometimes boils down to trying to read the teacher's mind. So I'm not going to go into great depth on this. But let's just say that in the ordinary use of the term trend, we would mean time predicting GDP, not the other way around.

With that in mind, see if you can take it from there.

[Josh Bozeman]

Thanks for the input. I wasn't actually needing help with the homework assignment itself-it just brought up some questions I had about how stats works internally I just wanted some insight into how stata creates the trend line (is it stata or just the math involved in the data itself) and the process in which you generally go into to add a trend line to a graph. I finished the homework, I just realized I went through the process but had no idea what was going on behind the scenes in the software.

I did, however, have the GDP and time aspects backwards...which now makes sense if you consider that it's a "trend.". Thanks again.