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st: correcting serial correlation in fixed effect model


From   [email protected]
To   [email protected]
Subject   st: correcting serial correlation in fixed effect model
Date   Mon, 2 Apr 2007 12:12:25 +0600

 Hi
I am working with panel data. I have used drukker test and found serial 
correlation. I am confused whether I can use newey2 to solve the problem since 
it is fixed effect model. I found in the web (reply to a question) that it is 
possible with a command like this xi: newey2 y x1 x2 i.fe xk, lag(#) force.
But as I found, it does not work. 
Another way is arellano-bond estimation. In my model, the dependent variable 
is tax-GDP ratio and independent variables are: agriculture value-added (%of 
GDP), industry value-added (% of GDP), International trade-GDP ratio, debt-GDP 
ratio, population growth rate, GDP per capita. Can I use Arellano-Bond 
estimation in my model?

Can I solve the serial correlation problem within fixed effect model?

I am also confused about the degree of serial correlation in drukker test. 
Does it mean that there is first-order correlation or a higher degree? What 
should I put in lag (#) option in newey2 command?

I am looking forward for your help. Thank you very much in advance.

Sincerely, 
Sams Uddin Ahmed
Bangladesh
[email protected]



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