The problem of autocorrelation in Panel Data

[hongchontim]

Dear all,

I am confused how to correct the autocorrelation in Panel Data?

Firstly, I saw some topics showing that by adding AR(1) into the model, it is equivalent to Cochrane-Orcutt iterative procedure, is that right??
Second, when I tried to add this AR(1) into random effect model, the E-views 6.0 does not allow me to do that. Why? If I cannot implement this procedure, is there any direct and simple way to remove the autocorrelation?
Third, I try to apply Cochrane-Orcutt Iterative procedure manually but some weird things happened. I get my first rho is 0.81XX, second rho is 0.05XX, third is 0.8XXX, fourth is 0.01XX. Did i perform it in the right direction. I uploaded my database while lgrealrate is dependent variable and lgcapita is independent variables. This is just a simple bivariate panel!!

Can someone give me some suggestions?

Thanks for everyone'e help!!

ChonTim