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RE: st: autocorrelation


From   "David M. Drukker, StataCorp" <ddrukker@stata.com>
To   statalist@hsphsun2.harvard.edu
Subject   RE: st: autocorrelation
Date   Fri, 29 Apr 2005 11:19:16 -0500

Thushyanthan Baskaran <tbaskaran@diw.de> wrote that he has panel data with
some form of within panel serial correlation and conditional
heteroskedasticity.

If the panel-level effect is independent of the covariates in the model,
Thushyanthan could type

. xtgee y x1 x2, i(panel_id) corr(unstructured) robust

The above command will estimate the parameters of a linear panel-data model
with arbitrary within panel correlation and the estimated VCE will be robust
to conditional heteroskedasticity over the panels.

If the panel-level effect is not indepedent of the covariates in the model,
i.e.  Thushyanthan is interested in a fixed-effect type model, then
Thushyanthan should difference the data before estimating the model to
remove the panel-level effect.  For example, assuming that the dataset is
already -tsset-,

. gen double Dy  = D.y
. gen double Dx1 = D.x1
. gen double Dx2 = D.x2
. xtgee Dy Dx1 Dx2, i(panel_id) corr(unstructured) robust noconstant

would provide consistent estimates of the parameters of interest and a
heteroskedasticity robust VCE.

In Stata 9 one can type 

. xtgee D.y D.x1 D.x2, i(panel_id) corr(unstructured) robust noconstant 

The -noconstant- option is specified because an intercept in the differenced
data is a time trend in the undifferenced data.  However, some researchers are
so averse to estimating a regression model without an intercept that they
do not specify the -noconstant- option.

I hope that this helps.

	-- David
	   ddrukker@stata.com
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