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st: The use of (time) dummies in a dynamic system GMM framework, usingxtabond2
Can you tell me what is the right way to include time dummies, or
dummies in general when using the xtabond2 command? The difference
equation cannot deal with normal dummies, while the level equation does
need normal (0-1) dummies. I have tried to replicate DPD98-output (where
there is an option to 'use time dummies') with identical datasets by
including the dummies as they are (0 or 1)for the level equation, and by
including a transformed dummy series (that becomes the normal dummy
series after taking first differences) for the difference equation.
However, this does not lead to the required results, and replication of
DPD-coŽfficients seems impossible. I know that standard errors are not
comparable between stata and DPD, because Stata uses Windmeijer
correction, but the replication of the coefficients themselves ought to
be possible. However, I can't seem to succeed.
Thus; in one sentence: how does one correctly enter dummy variables with
the xtabond2 command? What should those dummies look like?
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