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st: fixed effects & autocorrelation& heteroskedasticity


From   "Antonio Rodrigues Andres" <ara@sam.sdu.dk>
To   <statalist@hsphsun2.harvard.edu>
Subject   st: fixed effects & autocorrelation& heteroskedasticity
Date   Tue, 25 May 2004 18:43:34 +0200

I have a doubt on panel data. First, I have some prior beliefs that some
of the explanatory variables are correlated with some indivvidual
specific effects. I use the Hausman test which indicates that the fixed
effects model is more appropriate than random effects.

My next step was to check autocorrelation in the fixed effects model.
For that, I use the command xtregar, fe which already corrects for ar(1)
in the error term. I got low values of the BFN and high rhos (0.85,
0.90). This indicates the presence of autocorrelation. To check the
problem of heteroskedasticity in the fixed effects model, i just use the
command xttest3. I reject the null hypothesis and therefore there is
groupwise het.

Now , I dont know how to proceed. I should type

xtgls dep.var inde.var i.country, panel(corr)
This would account for heteroskedasticy and autocorrelation?

If this were correct, the problem is that my panel is unbalanced and
xtgls doesnt allow unbalanced panels

Any suggestion
Toni
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