I am estimating my panel data model using xtabond2 with time dummies
as follows;
yr70_74, yr75_79, yr80_84, yr85_89, yr90_94, yr95_99, yr00_04. Thus,
my T=7 ( where t=1...7). However, before including the time dummies
the model starts estimating at period 3. Does it mean that I can only
include my time dummies starting with yr80_84 or yr75_79?
It is standard with Arellano-Bond difference estimator to lose the
first two obs. of your level series. It is a model in first
differences, so you lose one obs. defining the dependent variable,
and as the model is dynamic you include the lagged difference as a
regressor. Defining the lagged difference of a level requires two
observations.
Through sleight of hand, the GMM-System estimator of Blundell-Bond
(which is in fact the default in xtabond2) only loses one
observation, as it can be thought of in levels with a lagged level as
a regressor. Thus with GMM-System you should be able to include time
periods 2..7.
