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From |
Christopher F Baum <[email protected]> |

To |
[email protected] |

Subject |
st: Re: fixed effects models |

Date |
Sun, 19 Oct 2003 19:08:46 -0400 |

On Sunday, October 19, 2003, at 02:33 AM, Giorgio wrote:

Fixed effects models (with individual effects) cannot contain time-invariant variables; it is that simple. Random-effects models can contain time-invariant variables (but have their own set of issues).

1) I've tried to use xtregar,fe but I had a problem: if I use time-invariant

variables I receive this error message

conformability error;

You have issued a matrix command attempting to combine two

matrices that are not conformable, for example, multiplying

a 3x2 matrix by a 3x3 matrix. You will also get this message

if you attempt an operation that requires a square matrix and

the matrix is not square.

When I do not use them I'm able to use xtregar,fe...unfortunately my

time-variant variable are really important. Where could the problem be?

2) without the time-invariant variables I've obtained the valuesThe tests are not standard D-W. Their motivation, and complete references to the underlying econometric literature, are provided in the Cross-Sectional Time-Series reference manual (for V8) or the Reference Manual (for V7). Sometimes there is no substitute for a careful reading of Stata's excellent documentation. I would venture that a sizable fraction of the price charged for the software can be related to the documentation; good documentation (at the level of a fine textbook) is expensive to produce and maintain.

rho_ar is 0.33224443.

the modified Bhargava et al. Durbin-Watson = 1.3479768

and the Baltagi-Wu LBI = 1.4145928

Unfortunately I'm not able to read this tests. Are they simple DW? Hence,

since they are closed to 2, could I assume that there is no first order

aoutocorrelation? Could you suggest to me some books or paper to read these

tests?

No. You could of course look at the matrix of pairwise correlations of each pair of panel units, but I do not know of a test that would allow you to combine that (N)(N+1)/2 set of pairwise correlations among T-element vectors into a single statistic. That is not to say that it may not exist, but I am not aware of it.3) Given that I've been analysing a Gravity Model, I presume to have "correlation across panel units". Could you suggest to me a test or a procedure to test this type of correlation, given N>T?

Kit

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**Follow-Ups**:**st: Re: Re: fixed effects models***From:*"Giorgio Ricchiuti" <[email protected]>

**Re: st: Re: fixed effects models***From:*Jean-Fran�ois Godin<[email protected]>

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