Dear all,

I am running a first-differences regression and was wondering if country specific time trends can be used as country fixed-effects should not be used in a FD regression?

I have data from 1985 to 2010 so I compute generate time trends as follows;

Code:
gen time = year - 1985
gen time2 = time^2
qui xi i.iso3_code*time, pref(_yi_)
qui xi i.iso3_code*time2, pref(_y2_)
I would like to run the following regression;

Code:
xi: reg Y_yi_* _y2* X1 X2
Is this an appropriate way to proceed? I realize that this is not a strictly Stata question but any help will be greatly appreciated. Thank you!

Sincerely,

Milu