Issue on data collection: negative ECB rates

[jpfeifer]

In linear(ized) models, there are no natural bounds to variables. Thus, having negative values is not a problem. Regarding stationarity, the post at

Linear detrended data or demeaned growth rate data?

This is a matter of taste and theory. If you believe your model, then the interest rate is stationary, even if in the short sample you are using you cannot reject the null of a unit root. In that case, from a model perspective the problem is with econometric testing in the data. However, if you are unhappy with using the level, you can still use first differences for the interest rates as long as you are using a correct observation equation, i.e. you are matching the first differences in the d…

comes to mind