I have time series data from 1947-1971 for prices and quantity indices. In the original paper from 1975 which I obtained the data the authors did not detrend the data. Here is how I detrended the data:
- I applied the Hodrick Prescott filter to each of the variables via Eviews
- I obtained the residuals values from the Hodrick Prescott and examined them.
- It was good because of no trend so I took the residuals and replaced them for each of the variables. Then I proceeded to the estimation of the model.
Would this be correct approach to detrend the data?