I am conducting a data analysis. I have a panel with individual firms with firm-specific and macroeconomic variables. I would like to run an OLS regression adjusted for firm clustering effects and accounting for time effect (I have 449 firms and 36 time periods, unbalanced panel)
The question arises: When I include time-dummies will the effect of the "overall" macroeconomic variable absorbed by the dummies, in other word: Will including time-dummies lead to multicollinearity between the time-dummies and the "macroeconomic" variables?
I am wondering because different studies use this approach, although it appears more logical to me, to exclude the macroeconomic variables when including time-dummies.
Did I fail to consider anything important here?