Tewodaj,
It seems to me that
1. xtabond y , lags(1) pre(x, lag(1,1) )
2. xtabond y , lags(1) pre(x lag_x, lag(0,1) )
actually provide different estimators for the same model:
y(it) = y(i t-1) + x(it) + x(i t-1) + e(it).
While method 1 includes L1.x (but not further lags) as instruments, method 2
includes both L1.x and L1.lag_x, which is L2.x, as instruments. This also
explains why method 2. is equivalent to
3. xtabond y , lags(1) pre(x, lag(1,2) )
which still considers the same model but includes L1.x and L2.x as
instruments, exactly as method 2.
Giovanni
TEWODAJ MOGUES <[email protected]>:
> Hi Stata users,
>
> I am setting up a distributed lag model in xtabond, and I am a bit puzzled
> about what xtabond is doing exactly when I restrict the instrument set of the
> distributed lags.
>
> Say I want to model:
> y(it) = y(i t-1) + x(it) + x(i t-1) + e(it)
> where x is a predetermined variable. Suppose I want to restrict the
> instrumens of x to just one further lag of x. There are two ways to write the
> command, and they should be identical:
>
> 1. xtabond y , lags(1) pre(x, lag(1,1) )
> 2. xtabond y , lags(1) pre(x lag_x, lag(0,1) )
>
> where lag_x is a variable I created by typing:
> generate lag_x = L.x
> These two commands give different results, which is puzzling. On the other
> hand, 2. gives, strangely enough, identical results to the following
> command:
> 3. xtabond y , lags(1) pre(x, lag(1,2) )
>
> My question is: If I want to restrict the instruments of x to just one lag,
> which of the commands above should I use? Asked more open-endedly: What is it
> that 1. is doing versus that which 2. and 3. are doing in terms of the
> instrument set they are setting up?
>
> Thanks for any thoughts on this.
> Tewodaj
>
> ~.~.~.~.~.~.~.~.~.~.~.~.~.~.~.~.~.~.~.~.~.~.~
> Tewodaj Mogues
> Dept. of Agricultural and Applied Economics
> University of Wisconsin - Madison
> 427 Lorch St. #317, Taylor Hall
> Madison, WI 53706
>
> *
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>
--
Giovanni Bruno
Istituto di Economia Politica, Universit� Bocconi
Via U. Gobbi, 5, 20136 Milano
Italy
tel. + 02 5836 5411
fax. + 02 5836 5438
*
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