Consider the Time and Entity Fixed Effect Model with a Single

question 39

Essay

Consider the time and entity fixed effect model with a single explanatory variable
Y_it = β₀ + β₁X_it + $\gamma _ { 2 }$ D2_i + ... + $\gamma _ { n }$ Dn_i + δ₂B2_t + ... + δ_TBT_t + u_it,
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_it?

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Definitions:

Habit

A regular behavior or routine that is performed repeatedly and often automatically.

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The ability to produce ideas or problems to solutions that are unique, appropriate, and valuable.

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