Hello everyone,

i have panel data on a monthly basis over a time span of 14 years for 26 cities. Simply speaking, each monthly observation contains information about a respective city, the date of observation (e.g. "2014m1"), the temperature (ab_temp), as well as the Google Search Volume (DSVI_city) of that city in the given month.

I want to regress DSVI_city on ab_temp. I am told to:

1) Include year-month fixed effects in the regression
2) Cluster standard errors by city and year-month

I tried the following code:


Code:
. xtset city_id date

Panel variable: city_id (unbalanced)
 Time variable: date, 2004m1 to 2017m12, but with gaps
         Delta: 1 month

. xtreg DSVI_city ab_temp, fe vce(cluster city_id)

Fixed-effects (within) regression               Number of obs     =      3,588
Group variable: city_id                         Number of groups  =         26

R-squared:                                      Obs per group:
     Within  = 0.0004                                         min =         42
     Between = 0.0061                                         avg =      138.0
     Overall = 0.0004                                         max =        168

                                                F(1,25)           =       3.54
corr(u_i, Xb) = 0.0010                          Prob > F          =     0.0716

                               (Std. err. adjusted for 26 clusters in city_id)
------------------------------------------------------------------------------
             |               Robust
   DSVI_city | Coefficient  std. err.      t    P>|t|     [95% conf. interval]
-------------+----------------------------------------------------------------
     ab_temp |   .0038789   .0020617     1.88   0.072    -.0003673    .0081252
       _cons |  -.0020442   .0005277    -3.87   0.001    -.0031311   -.0009573
-------------+----------------------------------------------------------------
     sigma_u |   .0168631
     sigma_e |  .59288721
         rho |  .00080831   (fraction of variance due to u_i)
------------------------------------------------------------------------------
So far, I think that I only clustered the standard errors by city and not by city and year-month.
My line of reasoning was that I thought it wouldn't make sense to cluster the standard errors by city and year-month, as this would give me as many clusters as observations (as for each city, there is only one unique year-month observation)...


Given on the information provided, could anyone be so kind and provide me with some feedback whether I implemented the code correctly?
(I am still quite new to Stata and already went through many different posts and explanations, but I am not sure if I understood everything properly...)

Thanks a lot in advance for your time and support-it is highly appreciated!

Samuel