On Sep 1, 2004, at 2:33 AM, John wrote:
I'm interested in fitting a var model with some exogenous variables on
panel
data for N countries.
I figured an easy way to do this would be
- -var y x1 x2, exog(country1-countryN other) noc
where "country" are indicator variables giving a country-specific
intercept,
and "other" are other exogenous variables.
Are there any problems with such an approach? Does this approach
assume that
the country effects are Fixed Effects? Is this a problem?
A VAR is a set of OLS regressions of several Y variables on a set of
lags of all of the Ys plus, optionally, some Xs. You seem to have three
dependent variables (Y, x1, x2). By default the var command will
regress each of the dep vars on two lags of all of the dep vars. If the
data are stacked in "long" format, so that you have used a panel tsset
to define that these are panel data, var will not run at all. If you
don't use tsset, var will treat the first observation on the second
country as the T+1st observation of the first country, and so on when
it takes lags. This will make no sense at all.
So no, I don't see that VAR is what you're looking for. Why not just
fit a dynamic panel data model (xtabond or xtabond2)? That would appear
to be closer to the specificatiion you are considering.
Kit
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