I am running a panel data regression for 16 countries with 15 annual observations. Due to the fact that EViews does not provide an autocorrelation test for panel data (?), I had to switch for an absolutely unknown STATA. Hausman test (p=0,43) indicated that I should use Random Effects with GLS.

Based on guidelines here, I tested panel for heteroskedasticity, autocorrelation (HA) which are both present in the panel.

  1. To my understanding robust standart errors are fine to estimate approximate coefficients for variables with HA. I used xtreg rgdppc gerter trade empl, re cluster(id). Is this an "okay" method to remove HA? I am new to econometrics.

  2. In a post here, regressions' residual is tested for stationarity. Should I store the Panel RE GLS residual and test it for stationarity? Using Levin-Lin-Chu unit-root test, all series (rgdppc, gerter, trade, empl) showed stationarity (p=0,00), however, with Breitung none of them were stationary. Is this normal?

  3. And to the point - how should I test RE model for cointegration? With aforementioned GLS's residual or I should go instantly for the first difference?


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