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st: xtpcse vs. newey2 or itivreg2

From   "Mark Dincecco" <>
Subject   st: xtpcse vs. newey2 or itivreg2
Date   Mon, 3 Mar 2008 16:18:37 +0100


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:


xi: xtpcse y x1 x2, corr(ar1)


xi: newey2 y x1 x2, force lag(1)


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
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.


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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