Dear all,
It is my first post here. I have a panel data (N= 277 firms, T= 3 years). I used the Hausman test and chose a fixed effects model for my results. However, the modified Wald Test showed the presence of heteroscedasticity. Furthermore, I used xtcsd with peseran to test for cross-sectional dependence. The test rejected that there is no "cross-sectional dependence". If I used the cluster option with xtreg fe, I would adjust for heteroskedasticity but not for the cross-sectional dependence. Therefore, I used fixed effects with Driscoll and Kraay Standard errors (xtscc) to control for both problems. I am , however, afraid that xtscc assumes large T. Is having 3 years enough to use the xtscc as there is no particular time limit? Any other method to adjust for both heteroscedasticity and cross-sectional dependence?
Regards,
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