Consider the Time and Entity Fixed Effect Model with a Single

question 13

Essay

Consider the time and entity fixed effect model with a single explanatory variable $$Y _ { i t } = \beta _ { 0 } + \beta _ { 1 } X _ { i t } + \gamma _ { 2 } D 2 _ { i } + \ldots + \gamma _ { n } D n _ { i } + \delta _ { 2 } B 2 _ { t } + \ldots + \delta _ { T } B T _ { t } + u _ { i t } ,$$ Assume that you had estimated the above equation by OLS. Typically the coefficients for the entity and time binary variables are not reported. Can you think of situations where the pattern of these coefficients might be of interest? What could you do, for example, if you had a strong theoretical justification for believing that a few macroeconomic variables had an effect on $Y _ { i t }$ ?

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Definitions:

Invoice Approval Form

A document used to approve invoices for payment, ensuring the goods or services billed have been received and are satisfactory.

Perpetual Inventory System

An inventory accounting system that records goods and materials purchased and sold in real-time through the use of computerized point-of-sale systems and enterprise asset management software.

Merchandise Inventory

Items that a business possesses with the intention of selling them to consumers.

Accounts Payable

Amounts a company owes to creditors for goods or services that have been bought on credit and are payable within a specified period.