Dear research community,
After running several tests (including F-Test, Breusch and Pagan’s (1980) Lagrange Multiplier (LM) Test and Hausman (1978) Test) I came to the conclusion that a fixed effects model is the most appropriate one for my data.
To ensure that the estimates are efficient I run a couple of diagnostic tests.
Following a modified Wald statistic the idiosyncratic errors seem to be heteroskedastic. However there is no evidence of serial correlation following the test proposed by Wooldridge (2002).
--> here the sub-question if it is correct to run the command "xtserial" after:
egen countrynum = group(Country)
xtset countrynum
xtset countrynum Year, yearly
xtreg DV IVs, fe
The main question is whether I can make use of robust (sandwich) estimators to correct for heteroskedasticity even though there seems to be no autocorrelation problems?
Thanks for your help in advance.
Best
Frederic
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