I'm going to estimate a time series regression which has consumption as a dependent variable. My data source give it in nominal form and unfortunately there are no other sources. It is Question : Can I run a TS model with nominal values ? If not, what should I do ? I think there are 2 possible ways : First: Change variable form to Real form by divide it to CPI(consumer price index). Then change it to a stationary form (e.i Log form) and enter it in the model. Second: Change it suitably and correctly to become a stationary variable. e.i Log form
My question clearly is ; It is possible to use a nominal variable in a time series regression? (regardless of stationary issues)
Please explain which one is right to be done?