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st: heteroskedasticity in system of equations


From   marco.sanfilippo@unifi.it
To   statalist@hsphsun2.harvard.edu
Subject   st: heteroskedasticity in system of equations
Date   Mon, 21 Sep 2009 10:02:25 +0200

Dear all,

I'm trying to estimate a system of equations using a SURE methodology. My work is based on the idea that my two dependent variables share similar characteristics and are therefore affected by a similar set of independent variables. I assume that the error terms of the two eq. are somehow linked (e.g. unobsevables may affect both equations) and this is confirmed by the results of a Breusch-Pagan test for independent equations. I am working with a panel setting of 40 countries and 9 years for both the equations.

I have encountered two kinds of problem:
1. In both equations I have detected groupwise heteroskedasticity (via the xttest3 command). Going into the statalist archive, I have found that the command mysureg allows to correct standard error for intragroup correlation adopting maximum likelihood. I have also tried with the command _robust on predicted standard errors, but this gives back different results (too perfect in my opinion!). Is my method correct?

predict st1, equation(#1) stdp
predict st2, equation(#2) stdp
_robust st1 st2, cluster(panel) minus(50)
ereturn display

2. In order to take into account for panel fixed effects, I have adopted the within transformation, but as far as I know this requires to adjust the var-cov matrix for the degrees of freedom lost due to the exclusion of fixed effects.
In this case I have no idea how to programme this in stata with two equations.

Please let me know if you need any additional information.
Any suggestion is more than welcome, many thanks in advance.
best,
Marco




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