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st: xtabond2 : dropping variables due to collinearity
From
john ebireri <[email protected]>
To
"[email protected]" <[email protected]>
Subject
st: xtabond2 : dropping variables due to collinearity
Date
Fri, 4 May 2012 05:10:11 -0700 (PDT)
Dear stalist users,
I have this problem where stata drops some of my variables due to collinearity when using xtabond2.
The problem occurs when I introduce gdp to the model. The variables that get dropped due to collinearity are the lagged dependent variable-manufacturing value added/gdp, extrade-manufactured exports/gdp and inv-gross domestic investment/gdp. Any suggestions or solution please? I will show the results of both models:
. xtabond2 manvaad l.manvaad bcon fbank gbank bnkdev extrade govexp inv, gmmstyle(l.manvaad bcon fbank gbank, laglimits(2 1) collapse) ivstyle(bnkdev extrade govexp inv, equation(level)) robust twostep
Favoring space over speed. To switch, type or click on mata: mata set matafavor speed, perm.
Dynamic panel-data estimation, two-step system GMM
------------------------------------------------------------------------------
Group variable: id Number of obs = 75
Time variable : year Number of groups = 20
Number of instruments = 17 Obs per group: min = 3
Wald chi2(8) = 1716.17 avg = 3.75
Prob > chi2 = 0.000 max = 5
------------------------------------------------------------------------------
| Corrected
manvaad | Coef. Std. Err. z P>|z| [95% Conf. Interval]
-------------+----------------------------------------------------------------
manvaad |
L1. | .8575447 .1152912 7.44 0.000 .6315781 1.083511
|
bcon | .0567681 .0241147 2.35 0.019 .0095042 .104032
fbank | .0132493 .019177 0.69 0.490 -.0243368 .0508355
gbank | .0170984 .0090695 1.89 0.059 -.0006776 .0348743
bnkdev | .0328068 .0139792 2.35 0.019 .005408 .0602055
extrade | .0669047 .0152983 4.37 0.000 .0369205 .0968889
govexp | .0025887 .0003329 7.78 0.000 .0019363 .0032411
inv | .0990203 .0552824 1.79 0.073 -.0093312 .2073717
_cons | -.0693288 .0325576 -2.13 0.033 -.1331405 -.0055171
------------------------------------------------------------------------------
Instruments for first differences equation
GMM-type (missing=0, separate instruments for each period unless collapsed)
L(1/2).(L.manvaad bcon fbank gbank) collapsed
Instruments for levels equation
Standard
_cons
bnkdev extrade govexp inv
GMM-type (missing=0, separate instruments for each period unless collapsed)
D.(L.manvaad bcon fbank gbank) collapsed
------------------------------------------------------------------------------
Arellano-Bond test for AR(1) in first differences: z = -1.16 Pr > z = 0.245
Arellano-Bond test for AR(2) in first differences: z = -1.35 Pr > z = 0.176
------------------------------------------------------------------------------
Sargan test of overid. restrictions: chi2(8) = 5.17 Prob > chi2 = 0.740
(Not robust, but not weakened by many instruments.)
Hansen test of overid. restrictions: chi2(8) = 5.02 Prob > chi2 = 0.755
(Robust, but can be weakened by many instruments.)
Difference-in-Hansen tests of exogeneity of instrument subsets:
GMM instruments for levels
Hansen test excluding group: chi2(4) = 1.88 Prob > chi2 = 0.757
Difference (null H = exogenous): chi2(4) = 3.14 Prob > chi2 = 0.535
iv(bnkdev extrade govexp inv, eq(level))
Hansen test excluding group: chi2(4) = 3.80 Prob > chi2 = 0.434
Difference (null H = exogenous): chi2(4) = 1.22 Prob > chi2 = 0.874
The second estimation has got gdp included in it:
. xtabond2 manvaad l.manvaad bcon fbank gbank bnkdev extrade govexp inv gdp, gmmstyle(l.manvaad bcon fbank g
> bank, laglimits(2 1) collapse) ivstyle(bnkdev extrade govexp inv gdp, equation(level)) robust twostep
Favoring speed over space. To switch, type or click on mata: mata set matafavor space, perm.
L.manvaad dropped due to collinearity
extrade dropped due to collinearity
inv dropped due to collinearity
Dynamic panel-data estimation, two-step system GMM
------------------------------------------------------------------------------
Group variable: id Number of obs = 75
Time variable : year Number of groups = 20
Number of instruments = 18 Obs per group: min = 3
Wald chi2(4) = 11.25 avg = 3.75
Prob > chi2 = 0.024 max = 5
------------------------------------------------------------------------------
| Corrected
manvaad | Coef. Std. Err. z P>|z| [95% Conf. Interval]
-------------+----------------------------------------------------------------
bcon | .1790888 .0855126 2.09 0.036 .0114872 .3466903
fbank | -.0487292 .0512504 -0.95 0.342 -.149178 .0517197
gbank | -.0265053 .0343287 -0.77 0.440 -.0937883 .0407777
bnkdev | .1231247 .0603747 2.04 0.041 .0047924 .2414571
govexp | .0043526 .0014221 3.06 0.002 .0015654 .0071399
gdp | 8.00e-14 7.33e-14 1.09 0.275 -6.37e-14 2.24e-13
_cons | .0227216 .0973777 0.23 0.816 -.1681351 .2135783
------------------------------------------------------------------------------
Instruments for first differences equation
GMM-type (missing=0, separate instruments for each period unless collapsed)
L(1/2).(L.manvaad bcon fbank gbank) collapsed
Instruments for levels equation
Standard
_cons
bnkdev extrade govexp inv gdp
GMM-type (missing=0, separate instruments for each period unless collapsed)
D.(L.manvaad bcon fbank gbank) collapsed
------------------------------------------------------------------------------
Arellano-Bond test for AR(1) in first differences: z = 1.38 Pr > z = 0.167
Arellano-Bond test for AR(2) in first differences: z = -0.24 Pr > z = 0.813
------------------------------------------------------------------------------
Sargan test of overid. restrictions: chi2(11) = 81.53 Prob > chi2 = 0.000
(Not robust, but not weakened by many instruments.)
Hansen test of overid. restrictions: chi2(11) = 16.60 Prob > chi2 = 0.120
(Robust, but can be weakened by many instruments.)
Difference-in-Hansen tests of exogeneity of instrument subsets:
GMM instruments for levels
Hansen test excluding group: chi2(7) = 11.34 Prob > chi2 = 0.125
Difference (null H = exogenous): chi2(4) = 5.26 Prob > chi2 = 0.262
iv(bnkdev extrade govexp inv gdp, eq(level))
Hansen test excluding group: chi2(6) = 7.64 Prob > chi2 = 0.266
Difference (null H = exogenous): chi2(5) = 8.95 Prob > chi2 = 0.111
.
Thanks,
John.
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