Hello,
I have an unbalanced panel data set with a very large T to N ratio.
Essentially, I follow 5 countries over a period of 200 or more years.
I would like to correct for contemporaneously correlated errors, panel
heteroskedasticity, and common serial correlation. I have opted to use
xtpcsce, newey2, or xtivreg2 rather than xtgls following Beck and Katz (1995).
The basic specifications look like:
*xtpcse
xi: xtpcse y x1 x2, corr(ar1)
*newey2
xi: newey2 y x1 x2, force lag(1)
*xtivreg2
xi: xtivreg2 y x1 x2, bw(2) robust small
I have two questions. The first is the most critical:
1. Is the only difference here between newey2 or xtivreg2 AND xtpcse
that xtpcse controls for contemporaneously correlated
errors while newey2 or xtivreg2 does not?
I ask because newey2 offers better results than xtpcse but I wonder if
that is because newey2 does not correct for contemporaneously
correlated
errors. If not, then I will go with the newey2 estimates.
2. Is the only difference here between newey2 AND xtivreg2 that
xtivreg makes an adjustment for the degrees of freedom?
I ask simply for completeness.
Thanks very much for your help. I really appreciate it.
Sincerely,
Mark
PS. This inquiry was first submitted on Sunday. I thank Clive for his
suggestion at that time. However, as he notes his answer was
insufficient. I thus resumbit an updated version of the questions now.
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