Congratulation to the timeliness of your question! After what happened in the last couple of weeks, we may in fact stand again at the beginning of a Keynesian revolution. This notwithstanding, working with real variables should lend your model greater credibility. Putting interest rates on the right hand side of the equation is not an alternative to working with real variables; it just tells you the impact of inflation on whatever you test for. CEO, Goldman Sucks :-) _____ From: gretl-users-bounces(a)lists.wfu.edu [mailto:gretl-users-bounces@lists.wfu.edu] On Behalf Of Mariusz Doszyn Sent: Thursday, September 25, 2008 3:55 PM To: Gretl list Subject: [Gretl-users] Inflation... Hello... This question is not connected directly with gretl but I'll be grateful for your opinions. I've estimated panel data models for mainly UE countries with consumption, gross savings, invstments and money supply (M1) as dependent variables and income, interes rates, consumer prices index and time variable as an independent variables. Should all theses variables be corrected with restpect to inflation rates? Or maybe it's better idea to put inflation rate as an independent variable? Many keynesian economists used to analylize nominal variables... Thanks in advance for your help... Best wishes... Mariusz Poland