Hello, Dahlia,
I'm only a student so I can not say that the practice of using one of
those variables as instrument is econometrically right or wrong, but
this is something you can at least try because the Hansen test
suggests such instruments work whereas previously the instruments are
invalid. However, if you get different results by using different
variables while the Hansen tests suggest all are correct, then you
should be careful in choosing the "right" results. I don't know if
this is called "data snooping" but I'm puzzled how to choose in such
cases. If you find out, please let me know. Thanks.
Regarding your second question, you can specify gmm(cashflow, lag(2
2)) or gmm(cashflow, lag(1 1)) to use only t-2 or t-1 instruments.
Good luck,
Jack
On 5/24/05, [email protected] <[email protected]> wrote:
> Hi Jack,
> Thank you so much for your message. It is good to know that I am not the only
> one puzzled by these questions/ results.
>
> 1- So, you think that from an econometric point of view, it is not wrong to use
> only one of those variables in the gmmstyle option.
>
> 2- How do you specify the lags if you want to use instruments dated (t-2) only
> ?.
>
> I d very much appreciate your help.
>
> Dahlia Anwar El- Hawary
> Consultant
> Financial Sector Operations and Policy Department
> World Bank
> Tel: 202 473 5238
> *
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>
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