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st: Re: Re: ivreg2 use
In the end of your reply you stressed that a version of ivreg2 is currently
under development which will provide 'ivgmmN', allowing for arbitrary
heteroskedasticity and serial correlation in the error process.
This will be a enormous help for the research four which I need to go
frequently out of Stata. Do you know something more about its availability
or other GMM procedures already available?
----- Original Message -----
From: "Christopher F Baum" <firstname.lastname@example.org>
Sent: Wednesday, August 06, 2003 12:24 PM
Subject: st: Re: ivreg2 use
> On Wednesday, August 6, 2003, at 02:33 AM, Busakom wrote:
> > I have two simultaneous equations:
> > (1) y1 = a0*y2 + a1*x1 + a2*x2 + a3*x3 + e
> > (2) y2 = b0*y1 + b1*z1 + b2*z2 + b3*z3 + u
> > The variables are first-differences. As I understand,
> > I can perform 2SLS by using ivreg2:
> > ivreg2 y1 x1 x2 x3 (y2 = z1 z2 z3)
> > My problem is slightly more complicated than this.
> > What if, in each equation, there is a lag dependent
> > variable:
> > (3) y1 = a0*y2 + a1*x1 + a2*x2 + a3*x3 + a4*Ly1 + e
> > (4) y2 = b0*y1 + b1*z1 + b2*z2 + b3*z3 + b4*Ly2 + u
> > Here, Ly1 is correlated with e, and Ly2 is correlated
> > with u. I plan to instrument Ly1 with L2y1
> > (two-period lag of y1) and Ly2 with L2y2 (two-period
> > lag of y2).
> > I believe I can still use ivreg2 to deal with this
> > problem. My question is whether the following command
> > syntax is correct?
> > ivreg2 y1 x1 x2 x3 (y2 Ly1 Ly2 = z1 z2 z3 L2y1 L2y2)
> > And is -ivreg2, gmm- is the same as -ivgmm0-?
> Almost correct. You should disabuse yourself of the notion that "this
> is an instrument for that"; as frequently mentioned on this list and in
> the cited Stata FAQ, instrumental variables estimators do not work that
> way. All of the Z variables are instruments for all of the included Y
> variables. That said, what about your proposed regression?
> Your first equation contains regressors y2, x1-x3, and Ly1. It does not
> contain Ly2, so Ly2 should not be present in the included endogenous
> list to the left of the equals sign, or it will appear as a regressor
> in the equation, which presumably it should not. The instrument list is
> correct, if your assertion that the second lags are orthogonal to e and
> u is warranted. This can be tested with a diff-Sargan test (ivreg2
> orthog option). Note that ivreg2 will report that the instruments
> include x1, x2, x3 plus those you have specified (and constant) -- and
> that is correct. The included exogeneous variables are indeed
> instruments as well.
> ivreg2, gmm is essentially the same estimator as the earlier ivgmm0. A
> version of ivreg2 is currently under development which will provide
> 'ivgmmN' -- that is, allowing for arbitrary heteroskedasticity and
> serial correlation in the error process. ivgmm0 (and its implementation
> within ivreg2) only allows for the former.
> * For searches and help try:
> * http://www.stata.com/support/faqs/res/findit.html
> * http://www.stata.com/support/statalist/faq
> * http://www.ats.ucla.edu/stat/stata/
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