Dear Statalisters,
I need some help concerning the right choice of commands in my panel data set. It includes 266 cross sections and 18 time periods (strongly balanced). Random effects are rejected in favour of fixed effects. Since the data is heteroskedastic, autocorrelated, contemporaneously correlated and includes a lagged dependent variable, I would take first differences to eliminate autocorrelation, explicit fixed effects and the correlation of the lagged dependent variable with the disturbances.
Usually, I would then use the xtabond2 estimator to account for heteroskedasticity and contemporaneous correlation. However, many of the independent variables are dummies and Roodman (2009, p. 115) stated that this command shouldn't be applied if any dummy is 0 for almost all or 1 for almost all observations which is the case with my data. Therefore, I considered the xtpcse estimator. Unfortunately, this resulted in an error message.
Questions
1. Can I use the xtpcse estimator in this setting?
2. Can anyone tell me where the presented command goes wrong?
If you need more details, let me know.
Kind regards,
Alex
I need some help concerning the right choice of commands in my panel data set. It includes 266 cross sections and 18 time periods (strongly balanced). Random effects are rejected in favour of fixed effects. Since the data is heteroskedastic, autocorrelated, contemporaneously correlated and includes a lagged dependent variable, I would take first differences to eliminate autocorrelation, explicit fixed effects and the correlation of the lagged dependent variable with the disturbances.
Usually, I would then use the xtabond2 estimator to account for heteroskedasticity and contemporaneous correlation. However, many of the independent variables are dummies and Roodman (2009, p. 115) stated that this command shouldn't be applied if any dummy is 0 for almost all or 1 for almost all observations which is the case with my data. Therefore, I considered the xtpcse estimator. Unfortunately, this resulted in an error message.
:
xi: xtpcse D.(y laggedy indvars i.countryid i.year), correlation(ar1) no time periods are common to all panels, cannot estimate disturbance covariance matrix using casewise inclusion r(459);
1. Can I use the xtpcse estimator in this setting?
2. Can anyone tell me where the presented command goes wrong?
If you need more details, let me know.
Kind regards,
Alex