Serial correlation in panel data

1. Durbin Watson test and panel data
Professor Olasehinde Timilehin commneted that > Durbin Watson can be applied in Panel data
for autocorrelation testing as per Baltagi.

2. How to remove serial correlation from Panel Data?
Professor Suborno Aditya​ commented as such >> There are several approaches to remove
serial correlation. Alternative approaches include using lagged variables of the dependent
variable however literatures suggest its suppressive effect on overall outcome. Other approach
is using first difference of variables but by doing this you lose dynamism and critical information
from your data and hence you may end up with wrong results. Hence, it is better to use
appropriate methods and techniques to manage serial correlation rather than removing it from
the data while estimating panel regression. If it is AR of order 1, Panel regression with Cluster
option (xtreg, cluster) should be alright. Or you can estimate using XTREGAR instead of
XTREG command that by default manage serial correlation. In that case no need to use cluster
option any more. However, if serial correlation of order 1 is present alongside
heteroskedasticity or/and cross section dependence, using FGLS or PCSE is better. In most
literatures, authors do no check for higher order or possibly moving average serial correlation.
Thus, managing for only AR1 where your data actually has higher order or moving average
autocorrelation, will not reveal efficient or accurate result. However, many authors overlook it
and simply estimates equations managing AR1 and gets published. The challenge is
determining whether higher order or MA autocorrelation exists in your data after you have
already identified autocorrelation of AR1. If it can be identified, there are very specific
techniques to manage that in panel estimation.

3. Diagnostic checking in panel data
Professor Najid Iqbal commented as such > One can use modified wald test for group
heteroskadesticity,, autocorrection by Wooldrigde, and for cross sectional dependence by
Pesaran test

4. EVIEWS 9.0, EVIEWS 9.5 and panel data.
Professor Burcu Özcan commented about first generation panel data and also cross section
independence test as such >> Eviews-9 or Eviews 9.5 run first generation panel tests. Also you
can easily do cross section independece tests by these Eviews version
Meo School of Research
Shishir Shakya
Noman Arshed
Serial correlation in the panel data
Hossain Academy Note
Univariate Models
Multivariate Models
Panel Data Model