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st: Re: VAR on panel data
On Sep 1, 2004, at 2:33 AM, John wrote:
A VAR is a set of OLS regressions of several Y variables on a set of
lags of all of the Ys plus, optionally, some Xs. You seem to have three
dependent variables (Y, x1, x2). By default the var command will
regress each of the dep vars on two lags of all of the dep vars. If the
data are stacked in "long" format, so that you have used a panel tsset
to define that these are panel data, var will not run at all. If you
don't use tsset, var will treat the first observation on the second
country as the T+1st observation of the first country, and so on when
it takes lags. This will make no sense at all.
I'm interested in fitting a var model with some exogenous variables on
data for N countries.
I figured an easy way to do this would be
- -var y x1 x2, exog(country1-countryN other) noc
where "country" are indicator variables giving a country-specific
and "other" are other exogenous variables.
Are there any problems with such an approach? Does this approach
the country effects are Fixed Effects? Is this a problem?
So no, I don't see that VAR is what you're looking for. Why not just
fit a dynamic panel data model (xtabond or xtabond2)? That would appear
to be closer to the specificatiion you are considering.
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