If you included both time and entity fixed effects in the regression model which includes a constant, then
A)one of the explanatory variables needs to be excluded to avoid perfect multicollinearity.
B)you can use the "before and after" specification even for T 2.
C)you must exclude one of the entity binary variables and one of the time binary variables for the OLS estimator to exist.
D)the OLS estimator no longer exists.

Question

If you included both time and entity fixed effects in the regression model which includes a constant, then
A)one of the explanatory variables needs to be excluded to avoid perfect multicollinearity.
B)you can use the "before and after" specification even for T > 2.
C)you must exclude one of the entity binary variables and one of the time binary variables for the OLS estimator to exist.
D)the OLS estimator no longer exists.

Quizplus · Accepted Answer

The Answer is C

If You Included Both Time and Entity Fixed Effects in the Regression