Hi
I´m working with my master thesis where I use ARDL. It´s my first time in Stata, so I would appreciate any help I can get. I have a problem with one of the assumptions, linearity. Both oil price and real wage are non-linear. I tried to make log variables, but they are still not linear. I found an article by Hamilton about oil prices, where he propose a non-linear transformation (Net oil price increase). NOPI (i.e., the amount by which the log of oil prices in quarter t, pt, exceeds the maximum value over the previous 4 quarters; and 0 otherwise)
Does anyone know how I can make my variables linear? And the commands for this in Stata?
Thanks
Anne
I´m working with my master thesis where I use ARDL. It´s my first time in Stata, so I would appreciate any help I can get. I have a problem with one of the assumptions, linearity. Both oil price and real wage are non-linear. I tried to make log variables, but they are still not linear. I found an article by Hamilton about oil prices, where he propose a non-linear transformation (Net oil price increase). NOPI (i.e., the amount by which the log of oil prices in quarter t, pt, exceeds the maximum value over the previous 4 quarters; and 0 otherwise)
Does anyone know how I can make my variables linear? And the commands for this in Stata?
Thanks
Anne
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