A question about GDP interacted with Quarter Fixed Effects

[david schtrutz]

Hi!

What could be the idea behind interact GDP with Quarter Fixed Effects in a Difference in Difference model (GDPfor2014_i *QuarterFE_t)?
I understand that treatment could somehow effect GDP if it was not interacted but is there any more explanation to why it is a good idea to interact GDP with Quarter Fixed Effects?


Total passengers aviation = B₀ + B₁Sweden_i+ B₂After2018Q2_it + B₃(Sweden_i*After2018Q2_it) + B₄QuarterFE_t+ B₅CountryFE_i+ B₆(GDPfor2014_i *QuarterFE_t)+u_it

Total passengers aviation: Total passengers that travel with aviation
Treatmeant group = Sweden
Treatment = A tax was implented at 2018 in the secound quarter

Regards
David

[Clyde Schechter]

I'm guessing that the quarter fixed effect you are looking at is not based on calendar year quarters like 2018q1....2019q2, but just on the four quarters of the year: 1, 2, 3, and 4. In that case the gdp#quarter interaction would be used to capture seasonal variation in the gdp effect.

[david schtrutz]

Thanks! "In that case the gdp#quarter interaction would be used to capture seasonal variation in the gdp effect." was the answer I was looking for