Hello together,

I need some help in understanding cross-sectional dependence regarding the use of Driscoll-Kraay standard errors (code -xtscc-).
1.) What does cross-sectional dependence intuitively mean? If I have a panel checking GDP per capita on life expectancy of e.g. t=20 and n=20 EU countries, does it explain the dependence of the effect measured in Germany on another cross section such as France and Italy?

2.) If yes, in how far does this design a statistical problem?

Additional Question 3.) If in cross-sec. dependence occurs next to heteroskedasticity and autocorrelation in a panel data set, is there an argument to use either POLS over Fixed effects?

I need an easy approach to understand the concept and issues related to cross sectional dependence. Unfortunately, the textbooks at hand do not give me a tangible explanation.

Thank you, apreciate every help.

BR
Kevin