Hi all,

I have a concern with respect to the interaction term as follows:
My panel dataset includes 404 banks from Eurozone from 2005-2019. Let's say I want to examine the difference between two bank groups' profitability (i.e., North vs. South) in the low and negative rates era (i.e., 2012 onward).

I have created 2 dummy variables, i.e., north takes the value of 1 if banks are domiciled in Northern Euro countries; and neg_era takes the value of 1 if examining periods are prior to 2012. sovereign_risk is my main variable of interest.

I have 3 codes as follows:

Code:
xtabond2 ROAA l.ROAA l2.ROAA sovereign_risk c.sovereign_risk#i.north bank_size cap_adequacy cus_deposit liquidity cost_efficiency credit_risk bank_div i.Year if neg_era==0, gmm(ROAA sovereign_risk, lag(2 .)) iv(bank_size cap_adequacy cus_deposit liquidity cost_efficiency credit_risk bank_div i.Year) noleveleq robust small twostep

xtabond2 ROAA l.ROAA l2.ROAA sovereign_risk c.sovereign_risk#i.neg_era bank_size cap_adequacy cus_deposit liquidity cost_efficiency credit_risk bank_div i.Year if north==1, gmm(ROAA sovereign_risk, lag(2 .)) iv(bank_size cap_adequacy cus_deposit liquidity cost_efficiency credit_risk bank_div i.Year) noleveleq robust small twostep

xtabond2 ROAA l.ROAA l2.ROAA sovereign_risk c.sovereign_risk#i.neg_era bank_size cap_adequacy cus_deposit liquidity cost_efficiency credit_risk bank_div i.Year if north==0, gmm(ROAA sovereign_risk, lag(2 .)) iv(bank_size cap_adequacy cus_deposit liquidity cost_efficiency credit_risk bank_div i.Year) noleveleq robust small twostep
Temporarily ignoring the selection of the number of instruments, could anybody point out the difference between the first code and two later codes? I don't seem to have a clear answer!

Thanks,

Sang