st: How to correctly include year effects in panel data

[Herman Haugland <herman.haugland@gmail.com>]

Hi!

I am trying to replicate the work of Miles et al. "Optimal bank
capital", and I'm puzzled about how did he implement year effects for
his model.

He runs a linear regression, estimating OLS, FE and RE.

The regression is:   beta = L.leverage

In addition, he includes year effects.  However, the problem is that
if I try to include year effects using:  i.year I get an error related
to the violation of the rank assumption.

He has a panel dataset that contains 6 individuals, and 26 periods
(half-years).  This means he has 13 years * 2 per panel = 26.

A regression like:

xtset id hy
xtreg beta L.lev i.year, fe vce(cluster id)

Does not work. So, how could was it that he calculated year effects?

Any ideas are much appreciated.

Thanks!





Med vennlig hilsen / Best regards,

Herman Haugland
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