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Testing for cross-sectional dependence in panel-data models

Rafael De Hoyos () and Vasilis Sarafidis ()

Stata Journal, 2006, vol. 6, issue 4, 482-496

Abstract: This article describes a new Stata routine, xtcsd, to test for the presence of cross-sectional dependence in panels with many cross-sectional units and few time-series observations. The command executes three different test- ing procedures —namely, Friedman’s (Journal of the American Statistical Associ- ation 32: 675–701) (FR) test statistic, the statistic proposed by Frees (Journal of Econometrics 69: 393–414), and the cross-sectional dependence (CD) test of Pe- saran (General diagnostic tests for cross-section dependence in panels [University of Cambridge, Faculty of Economics, Cambridge Working Papers in Economics, Paper No. 0435]). We illustrate the command with an empirical example. Copyright 2006 by StataCorp LP.

Keywords: xtcsd; panel data; cross-sectional dependence (search for similar items in EconPapers)
Date: 2006
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