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st: Autocorrelation in Panel Data, xtregar and xtreg


From   Massimiliano Sassone <massimilianosassone@gmail.com>
To   statalist@hsphsun2.harvard.edu
Subject   st: Autocorrelation in Panel Data, xtregar and xtreg
Date   Mon, 8 Apr 2013 16:45:03 +0800

Dear all,

I am using Stata 11 to analyze a panel data composed of 279
observations, derived from 31 regions over a 9-year period.

In order to check for autocorrelation on several models, I ran the
Wooldridge test by inputting the -xtserial- command. Since the Prob >
F is usually smaller than 0.05 (actually being equal to 0.00 several
times), I understood that we fail to reject the null hypothesis and
that, therefore, the data is strongly autocorrelated.

My strategy was to use the fixed effects method to analyze the data,
according to my interpretation of the robust Hausman test
(-xtoverid-). I made the mistake of not checking for autocorrelation
before running the analysis and I am now confused on how to proceed.

What is the best way to deal with the autocorrelation in this situation?
Should I use the -xtregar- function instead of -xtreg-?
Or is there a better way to deal with the issue?

Thank you so much for your support.

Massimiliano (Max) Sassone
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