in -xtscc- from SSC the error structure is assumed to be heteroskedastic, autocorrelated up to some lag, and possibly correlated between the groups (panels).
Nicola
At 02.33 03/03/2008 -0500, "Mark Dincecco" wrote:
>Thanks, Clive. I take it that bw(2) and not bw(1) must be used to
>model an AR1 process. The only difference I see between ivreg and
>newey is that ivreg makes the "small" adjustment for the degrees of
>freedom. But neither approach addresses the issue of contemporaneously
>correlated errors, right?
>
>Cheers,
>Mark
>
>On Sun, Mar 2, 2008 at 1:26 PM, Clive Nicholas
><[email protected]> wrote:
>> Mark Dincecco wrote:
>>
>> > 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 must correct for contemporaneously correlated errors, panel
>> > heteroskedasticity, and common serial correlation. I have opted to use
>> > newey2 or xtpcse rather than xtgls following Beck and Katz (1995).
>> >
>> > My question is the following: Is the only difference between newey2
>> > and xtpcse that xtpcse controls for contemporaneously correlated
>> > errors while newey2 does not? That is, does newey2 control for
>> > contemporaneously correlated errors? Please note that for both
>> > techniques I already control for panel heteroskedasticity and common
>> > serial correlation.
>>
>> [...]
>>
>> I think your reading of the differences are broadly correct, but
>> instead of using -newey2-, why not use -ivreg2-, downloadable from
>> SSC, instead? Then you could do:
>>
>> . ivreg2 y x1 x2, bw(2) robust small
>>
>> which gives you OLS estimates with Newey West standard errors.
>>
>> --
>> Clive Nicholas
>>
>> [Please DO NOT mail me personally here, but at
>> <[email protected]>. Thanks!]
>>
>> "Courage is going from failure to failure without losing enthusiasm."
>> -- Winston Churchill
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