How to control for time, both in estimation and simulation

[ANBurdett]

1. Estimate relevant processes with time dummies
2. Inspect the time dummies coefficients
3. Update specification: e.g. linear, quadratic, with/without structural breaks (selection of time dummies)
4. Run and validate the model with the parametric specification
5. If validation is passed, use parametric specification for projections
6. If validation is not passed, use time dummies (PCM) to rule out implementation errors, and go back to Changes required to unify the EU models #1.

Note:

• If time dummies are not significant, remove time trends