control variables in panel data

[sultan al shekaili]

hello

i run fe regression on firm specific variables as independent variable and firms's leverage ratio as dependent variable. i am also including macroeconomic data like real gdp growth rate. the macro economic data vary overtime but are the same for each cross-section year. Does that affect the validity of my regression? if no, can i call the macroeconomic variables as "control variables" because they do not vary over firms but do over years?

i hope my question is clear

thanks

[Wessel de Kroo]

Hey Sultan,

if anything a control variable is to make your regression results to be more valid.

You should think about control variable in the context of does it make sense to add this control variable that will be "constant" through my time period to add as a explanatory variable.

will a firm debt be influenced by a generalized measure of how well a economy is performing i.e. gdp growth; yes.

Here is a helpfull video : https://www.youtube.com/watch?v=pcObydOsMXc


If you would like concrete help on any stata related problem.

try to use dataex, so users will see what the type of data is you are working with

and make sure to over the FAQ`s for this forum once more!

see you