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Re: st: predetermined variables with xtabond2
From
Suryadipta Roy <[email protected]>
To
[email protected]
Subject
Re: st: predetermined variables with xtabond2
Date
Mon, 28 May 2012 09:30:53 -0400
Dear Soren,
I believe that you have got it right. pp.124 of the paper contains the
relevant information to your question. The iv( . ) option is for
strictly exogenous regressors, while the gmm( . ) option is for
predtermined or suspected endogenous variables. Thus, e.g.
" If w1 is strictly exogenous, w2 is predetermined but not strictly
exogenous, and w3 is endogenous, then
- xtabond2 y L.y w1 w2 w3 i.t, gmmstyle(L.y w2 L.w3) ivstyle(i.t w1)
twostep robust small orthogonal -
would fit the model with the standard choices of instruments—here with
two-step system GMM, Windmeijer-corrected standard errors,
small-sample adjustments, and orthogonal deviations." (pp. 127)
The - lag - option is helpful for controlling the number of
instruments- another issue of significance that has also been
discussed by Roodman in his other paper (Roodman, D. M. 2009. A note
on the theme of too many instruments. Oxford Bulletin
of Economics and Statistics 71: 135–158).
Overall, I believe that you are on track!
Best wishes,
Suryadipta.
On Sun, May 27, 2012 at 10:37 AM, Søren Møller-Larsson
<[email protected]> wrote:
> Dear Suryadipta
>
> Thanks you for your answer. Yes I did indeed. I am aware that the standard treatment of predetermined variables in system GMM is gmmstyle() and to use lags 1 and longer. Please correct me if I am wrong. In "how to xtabond2.." (2009) p. 124 it reads:
>
>
>
>
>
>
>
>
> "ivstyle() also generates one column per variable in System
> GMM, following (26). The patterns in (27) can be requested using the equation suboption, as in: iv(w1
> w2, eq(level)) and the compound iv(w1 w2, eq(diff)) iv(w1 w2, eq(level))."
> So is it just two different methods to treat predetermined variables? If so is there a reason to use one over the other
> Thanks againRegards
> Soren
>
>
>
>
> ----------------------------------------
>> Date: Sun, 27 May 2012 10:10:30 -0400
>> Subject: Re: st: predetermined variables with xtabond2
>> From: [email protected]
>> To: [email protected]
>>
>> Soren,
>> Did you read the following paper (The Stata Journal Volume 9 Number 1:
>> pp. 86-136) from the author of this code:
>> http://www.stata-journal.com/article.html?article=st0159
>>
>> I believe that you wil get the answers to your queries in the paper.
>>
>> Best wishes,
>> Suryadipta.
>>
>> On Sat, May 26, 2012 at 4:49 AM, Søren Møller-Larsson
>> <[email protected]> wrote:
>> > Dear all
>> >
>> > in the Stata help file of xtabond2 it reads the following:
>> > "
>> > y_it = x_it * b_1 + w_it * b_2 + u_it ...
>> >
>> > x_it is a vector of strictly exogenous covariates (ones dependent on
>> > neither current nor past e_it);
>> >
>> > w_it is a vector of predetermined covariates (which may include the lag of
>> > y) and endogenous covariates, all of which may be correlated with
>> > the v_i (Predetermined variables are potentially correlated with
>> > past errors. Endogenous ones are potentially correlated with past
>> > and present errors.);
>> > "
>> > So to me it looks like predetermined variables are part of the gmmstyle() instruments.
>> >
>> > However further down the text it is explained how predetermined variables are treated in the ivstyle() instrument matrix:
>> >
>> >
>> > ..."equation() is useful for proper handling of predetermined variables
>> > used as IV-style instruments in system GMM. For example, if x is
>> > predetermined, it is a valid instrument for the levels equation since
>> > it is assumed to be uncorrelated with the contemporaneous error term.
>> > However, x becomes endogenous in first differences, so D.x is not a
>> > valid instrument for the transformed equation. ivstyle(x) would
>> > therefore be inappropriate. The use of x as an IV-style instrument in
>> > levels only could be specified by iv(x, eq(level))."
>> >
>> > So my question is, when do I use gmm(h, laglimits(1 .)) and when do I use iv(h, equation(level)) for predetermined h, and what is the difference?
>> >
>> > Kind regard
>> > Soren
>> > Aarhus university, Denmark
>> >
>> > *
>> > * For searches and help try:
>> > * http://www.stata.com/help.cgi?search
>> > * http://www.stata.com/support/statalist/faq
>> > * http://www.ats.ucla.edu/stat/stata/
>>
>> *
>> * For searches and help try:
>> * http://www.stata.com/help.cgi?search
>> * http://www.stata.com/support/statalist/faq
>> * http://www.ats.ucla.edu/stat/stata/
>
> *
> * For searches and help try:
> * http://www.stata.com/help.cgi?search
> * http://www.stata.com/support/statalist/faq
> * http://www.ats.ucla.edu/stat/stata/
*
* For searches and help try:
* http://www.stata.com/help.cgi?search
* http://www.stata.com/support/statalist/faq
* http://www.ats.ucla.edu/stat/stata/