I have estimated a model with OLS, where I have found autocorrelation with Durbin-Watson and Breusch-Godfrey. I want to use Prais-Winsten or Cochrane-Orcutt to remove the problem. When estimating the model, it removes a variable, which is a squared variable of another variable in the model.

I use the following code:

gen yearsquared=year*year

For OLS:

reg ftheft tfr partic degrees year yearsquared

For Cochrane-Orcutt:

prais ftheft tfr partic degrees year yearsquared, corc

For Prais-Winston:

prais ftheft tft partic degrees year yearsquared

In both cases, yearsquared gets removed from Stata.

Any advice, as yearsquared shouldn`t be removed due to collinearity?


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