Dear all,
I have a question regarding the application of first-difference transformation to an interaction term created by multiplying a dummy variable with a continuous variable. Specifically, my dummy variable indicates Low-Cost airlines (yes=1, otherwise 0), and I have a continuous variable representing the operational cost, which is non-stationary. I intend to generate an interaction term, LCC_opcost, to capture the combined effect of these variables. To achieve stationarity, is it appropriate to apply the first-difference transformation to this interaction term?
Thank you for your help.
I have a question regarding the application of first-difference transformation to an interaction term created by multiplying a dummy variable with a continuous variable. Specifically, my dummy variable indicates Low-Cost airlines (yes=1, otherwise 0), and I have a continuous variable representing the operational cost, which is non-stationary. I intend to generate an interaction term, LCC_opcost, to capture the combined effect of these variables. To achieve stationarity, is it appropriate to apply the first-difference transformation to this interaction term?
Thank you for your help.
