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Econometrics Journal· 2026Q1

What Do We Get from Two-Way Fixed Effects Regressions? Implications from Numerical Equivalence

Shoya Ishimaru

Short summary

Two-way fixed effects (TWFE) regression coefficients can be interpreted as a weighted average of first-difference (FD) coefficients across all time horizons, with causal interpretation requiring common trends at all horizons simultaneously.

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Economics and EconometricsEconomics, Econometrics and Finance