Hi everyone,

Hope you are doing well and maybe you have some handful insights for the following.

My paneldata consists of monthly observations over x years for y firms.
My variable of interest is also monthly.

When I include time fixed effects (monthly) my variable of interest is dropped due to collinearity with the time fixed effects. Which makes sense.
If I include quarterly time fixed effects instead of monthly fixed effects; my variable of interest is not dropped by stata.
However I want to ask you:
- If I include quarterly fixed effects in case of monthly observations; is my model then still valid?
- Why can or can't I use this approach of using a time fixed effect that spans a larger time period than the unit of observation? What is the reasoning behind it?

Maybe you know by accident a paper that touches upon this issue.

Thank you!
Regards, Dominique