Currently am doing a research titled on the effect of foreign aid on the domestic private investment growth in case of eastern African countries. I have panel data. In order to control time specific effect in each country I used time dummy. But I fail to create dummy variable in stata 12.
I am not sure if I understood your question correctly. I assume that you have a categorical variable which captures your time variance, let's call it "wave". Then you can just add i. in front of this variable, e.g. "i.wave". Alternatively you can really create dummy variables by typing "tabulate wave, gen (wave)". Then you need to include each of the newly created dummy variables in your regression and stata will chose to drop one of them as the reference category or you can intentionally chose not to include one of them because you want to use it as the reference.
There are three ways to create dummy variables: one is to use generate, which creates one dummy variable at a time; another is to use tabulate, which creates whole sets of dummies at once; and the third is to use xi, which may allow you to avoid the issue of dummy-creation altogether.
Answer 1 of 3: Use generate
You could type
. gen young = 0
. replace young = 1 if age
Hi Dereje,
I suppose you are looking at macro data? If this is the case why don't you just add a time effect and potentially a squared term for time as well.
Do you have a balanced panel? I yes you can just create time as follows ( here I assumed you are looking at years and that you start year is in 1990)
gen time=year-1990
gen time2=time*time
In case you have an unbalanced panel you will just have to identify the start year in each country.
sort country year
by country: egen startyear=min(year)
gen time=year-startyear
gen time2=time*time
Hope this helps,
Pawel
Yes, all answer is correct. But the question is the necessity of the time variables in the panel data. Also, you can check join significance of the time variables using wald test.
Dear Plamen, I saw your answer here and used your way to create year dummy variables. However, as I included them in my regression (I left out one as refrence category), all except one of the year dummies are omitted of MK. Do you know what could be the problem?
It could be done in two ways,
1. i.year (this can be mentioned in the regression equation, and does not generate year dummies but gives exact results)
2. tab year, gen(y) (I am not sure if this code can be used in Stata12, I am using Stata17 instead). This code is helpful if you are using GMM estimator (xtabond2) in your model.
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