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st: RE: xtivreg


From   "Schaffer, Mark E" <[email protected]>
To   <[email protected]>
Subject   st: RE: xtivreg
Date   Mon, 7 Feb 2011 13:52:32 -0000

Lancine,

> -----Original Message-----
> From: [email protected] 
> [mailto:[email protected]] On Behalf Of 
> Lanciné Condé
> Sent: Monday, February 07, 2011 12:04 PM
> To: [email protected]
> Subject: st: xtivreg
> 
>  Hi
> I am currently working on the impact of the monetary union
> participationdecision. I want to estimate the following panel
> equation:
> 
> y= x+cu+ e
> 
> where cu is an endogeneous currency union dummy. I would like 
> to instrument
> cu by another dummy called h.
> But, the following stata command does not work:  xtivreg2 y x 
> (cu=h),fe
> first
> 
> The return result I receive is:
> 
>  xtivreg2 y x (cu=h), fd first
> 
> equation not identified; must have at least as many instruments not in
> the regression as there are instrumented variables
> r(481);
> 
> xtivreg2 y x (cu=h), fe first
> 
> equation not identified; must have at least as many instruments not in
> the regression as there are instrumented variables
> r(481);
> 
> The iv (h) variable is not recognised, but when I instrument with a
> continuous variable, as instrument, the equation works.
> 
> The xtiverg is running, but it does not give the F and J 
> statistics of the first step.
> 
>  I wanted to ask if it is forbitten to instrument a dummy by another
> dummy, or to use a dummy like instrument.

Instrumenting a dummy with a dummy can be legitimate.

My guess is that there is a collinearity problem here.  Does the variable h vary over time?  If it doesn't, then it will drop out when the within or first-differences transformations are applied.  What happens if you do something like

xtreg h, fe

?

Also, when you estimate using official xtivreg, are you using the FE, FD or GLS estimators?

--Mark

> 
> Could anyone help me to fix my described concern, and/or to get
> routines which can return all statistics associated to the xtivreg
> command, especially those relevant for the overidentification and the
> weak instruments?
> 
> Best regards.
> CONDE
> 
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