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st: xtabond2 and lagged endogenous variables

From   "James W. Shaw" <>
To   <>
Subject   st: xtabond2 and lagged endogenous variables
Date   Fri, 7 May 2004 14:35:02 -0400

Dear Sirs:

Can anyone tell me if -xtabond2- can be used to estimate a model where one
of the regressors is endogenous and one is predetermined (the lag of another
endogenous variable, not the outcome).  For example, I am interested in
estimating something akin to the following system of equations:

(1)  P_ij = U_ij + C_i(j-1) + X ,

(2)  U_ij = P_ij + C_i(j-1) + Z, and

(3)  C_ij = U_ij + P_ij + Y

where i indexes subject; j indexes time; P, U, and C are endogenous
variables; and X, Y, and Z are exogenous variables.  I think (though I am
not certain) that I can use -xtabond2- to estimate each equation separately
to overcome the consistency issue associated with lagged endogenous

For example, I think that the following code would be appropriate for
estimating equation (1):

xi: xtabond2  P U  L.C  X  , gmm(U, lag(2 . )) gmm(L.C)  iv(X Y Z,
eq(level))  twostep h(1) robust

Assuming -xtabond2- is capable of doing what I want, could someone please
tell me whether or not the above code is correct?

Thank you very much.

Best Regards,

James Shaw
College of Pharmacy
The University of Arizona

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