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Re: st: serial correlation in fixed effect model


From   "Clive Nicholas" <Clive.Nicholas@newcastle.ac.uk>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: serial correlation in fixed effect model
Date   Wed, 4 Aug 2004 20:02:16 +0100 (BST)

Christopher Gigoriou wrote:

> I have run the drukker test implemented on stata to detect serial
> correlation in fixed effect panel data models...it told me I have some
> serial correlation...then, to correct it, am I allowed to use the command
> xtgls then p(h) and c(a)??(since my model is specified with a FE)

You don't necessarily _have_ to use FGLS. You could, for instance, try
David Roodman's user-written -newey2-, downloadable from SSC. With this
routine, you can also fit a fixed-effects model _and_ obtain OLS parameter
estimates corrected for both autocorrelation and heteroscedasticity. For
instance:

. xi: newey2 y x1 x2 i.fe xk, lag(#) force

I was reminded about all this off-list by another Statalist member last
week. So long as you _don't_ have a lagged dependent variable, this works
just as well as -areg- or -xtreg, fe-.

CLIVE NICHOLAS        |t: 0(044)191 222 5969
Politics              |e: clive.nicholas@ncl.ac.uk
Newcastle University  |http://www.ncl.ac.uk/geps
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