I have already log-linearized my model by hand.
So far I have estimated the model using HP detrended data on some variables (real GDP, consumption, goverment expenses, employment,…) but not for other (federal funds rate and inflation).
I’m not sure if this is the right way to do things. Is it better to proceed the way I’m doing things or is it better to use the data in levels and apply the prefilter option (would this option also remove the trend in real GDP and consumption?)?
Should I remove the trends linearly or with HP filter?
Anyone knows what is the best way to do this?