I am estimating a model based on time series, which comes from theoretical background (economic theory), and the specification is quite common in empirical literature. However, I find that estimated errors are correlated, and therefore Breusch-Godfrey LM test does not reject null hypothesis of no autocorrelation. I am inclined do not change specification of the model (as I mentioned it comes from ecnomic theory), but autocorrelation bothers me. Since under autocorrelation, estimated coefficients are still unbiased (but variances of coefficients are biased), so can I simply neglect the autocorrelation? If no, what can I do without changing specification? I think to use HAC (Newey West) estimator to report in my regression table robust standard errors. Thank you in advance!
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1$\begingroup$ Check out this, this and this. $\endgroup$– Richard HardyCommented Nov 28, 2019 at 10:07
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1$\begingroup$ Thanks for the useful links! $\endgroup$– saneCommented Nov 28, 2019 at 10:28
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$\begingroup$ You are welcome! You may also consider whether your question might be a duplicate of any of those I linked to. Otherwise, you may indicate what is left uncovered in your question. $\endgroup$– Richard HardyCommented Nov 28, 2019 at 10:47
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$\begingroup$ I think that this question can be considered as a duplicate of one of them. But I don't know how to attach it to them. $\endgroup$– saneCommented Nov 29, 2019 at 15:44
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