## Suppose that X is strictly exogenous. A researcher estimates an ADL(1,1) model, calculates the regression residual

Question: Suppose that X is strictly exogenous. A researcher estimates an ADL(1,1) model, calculates the regression residual, and finds the residual to be highly serially correlated. Should the researcher estimate a new ADL model with additional lags or simply use HAC standard errors for the ADL(1,1) estimated coefficients? Answer: Serially correlation error can generally be reduced by …