How many dummy variables can I use

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sansan
Posts: 2
Joined: Fri Aug 29, 2014 4:03 pm

How many dummy variables can I use

Postby sansan » Fri Aug 29, 2014 4:13 pm

Hi, I'm working on my first econometrics project. My topic is on the impact of foreign direct investment on economic growth (as GDP). Panel data analysis, 10 countries, and 20 years. When I got my proposal's feedback, my professor suggested that I include dummy variables. He wrote: country dummies 9, and year dummies 19. My question is: can I include BOTH dummies? I asked another professor, and he told me that I could only use one dummy, that I couldnt' include both of them. Please and answer will be highly appreciated.

Thank you!

startz
Non-normality and collinearity are NOT problems!
Posts: 3798
Joined: Wed Sep 17, 2008 2:25 pm

Re: How many dummy variables can I use

Postby startz » Fri Aug 29, 2014 7:35 pm

Using both should be fine.

sansan
Posts: 2
Joined: Fri Aug 29, 2014 4:03 pm

Re: How many dummy variables can I use

Postby sansan » Sat Aug 30, 2014 6:03 pm

Oh thank you so very much!!


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