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st: Panel dynamic OLS


From   hctang@adb.org
To   statalist@hsphsun2.harvard.edu
Subject   st: Panel dynamic OLS
Date   Fri, 6 May 2011 14:13:32 +0800

Hi all,

I have been trying to find out whether panel DOLS such as that of Kao and 
Chiang (2000) and/or Mark and Sul (2003) be performed in Stata. It turns 
out a third-party contributor has written the Kao and Chiang panel DOLS 
with homogenous covariance structure called xtdolshm. 

I have a few general and specific queries which would really appreciate 
some (any) advice:

1) Can panel DOLS be performed via existing Stata commands like xtreg, 
xi:reg or etc? That is an user just add the lags and leads first 
differences of the suspected cointegrated variables in the estimated 
equation.

2) Are the standard errors produced in xtdolshm robust to 
heteroskedasticity and autocorrelation? Is this a concern at all in a 
panel time-series estimation as opposed to a typical large N small T 
panels?  If it is and the standard errors are not corrected, can one 
derive (and how) from existing information the Newey hetero and autor or 
any other corrected errors? 

3) If (2) is not feasible or straightforward, would varying the leads and 
lags of the cointegrated variables be a reasonable robustness check on the 
statistical significance of a variable of interest? Say we start with 
1-lead, 1-lag, then change to 2-lead, 2-lag and so on, to see whether the 
significance of say x1 (in a y x1 x2 x3 equation) changes. We will rely on 
the results of higher leads and lags, presumably because they can better 
address the hetero and autor concerns. 

4) Can the existing xtdolshm incorporate time specific effects or other 
deterministic regressors? If so, how does one write this out?

Thanks very much! 

Hsiao
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