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diagnostic checks
Posted: Mon Aug 16, 2010 7:36 am
by johnsmith
k
Re: diagnostic checks
Posted: Mon Aug 16, 2010 7:37 am
by startz
The Drubin-Watson suggests you have significant serial correlation.
Re: diagnostic checks
Posted: Mon Aug 16, 2010 7:45 am
by johnsmith
thanks for your reply
Is there a way to sort this out?
Re: diagnostic checks
Posted: Mon Aug 16, 2010 8:16 am
by startz
You probably have a variety of omitted slow-moving variables that would help explain the spread. The best thing to do would be to include such variables. The second best might be to make a statistical adjustment. Look at AR(1) in the EViews help.
Re: diagnostic checks
Posted: Mon Aug 16, 2010 8:23 am
by johnsmith
k
Re: diagnostic checks
Posted: Mon Aug 16, 2010 9:07 am
by startz
Probably.
The remaining issue is whether this has picked up a real lagged effect or just masked serial correlation. Unfortunately, in the latter case all the coefficients are screwed up. Normally, one would test this last model for serial correlation. Unfortunately, EViews doesn't seem to implement a test for panel data.
The other issue is to realize that this new model introduces a dynamic response that you have to take into account.