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RE: st: RE: dmexogxt questions


From   "Salvati, Jean" <JSalvati@imf.org>
To   <statalist@hsphsun2.harvard.edu>
Subject   RE: st: RE: dmexogxt questions
Date   Mon, 13 Sep 2004 18:10:35 -0400

Mark, Steve,

Thanks a lot for the replies. Thanks to Google, I just found one of your
papers about that ("Instrumental variables and GMM: Estimation and
Testing"). I'll read it tomorrow.

Jean Salvati
Econometric Support
(202) 623-7804
IS 12-1328
 

> -----Original Message-----
> From: owner-statalist@hsphsun2.harvard.edu 
> [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of 
> Mark Schaffer
> Sent: Monday, September 13, 2004 9:43 AM
> To: statalist@hsphsun2.harvard.edu
> Subject: Re: st: RE: dmexogxt questions
> 
> Jean,
> 
> Just a couple of footnotes to Steve's response:
> 
> Subject:        	st: RE: dmexogxt questions
> Date sent:      	Tue, 14 Sep 2004 00:31:36 +1200
> From:           	"Steve Stillman" <stillman@motu.org.nz>
> To:             	<statalist@hsphsun2.harvard.edu>
> Send reply to:  	statalist@hsphsun2.harvard.edu
> 
> > Hi Jean.  The answers to your questions are below.  Cheers, Steve
> > 
> > -----Original Message-----
> > From: owner-statalist@hsphsun2.harvard.edu
> > [mailto:owner-statalist@hsphsun2.harvard.edu]On Behalf Of Salvati, 
> > Jean
> > Sent: Saturday, September 11, 2004 8:49 AM
> > To: statalist@hsphsun2.harvard.edu
> > Subject: st: dmexogxt questions
> > 
> > 
> > Hello,
> > 
> > I have two questions about dmexogxt:
> > 
> > 1) The joint test clearly rejects the null hypothesis that all 
> > regressors are exogenous, but the tests on individual 
> regressors don't 
> > reject the null for any of the regressors (not even close).
> > 
> > More precisely, let's say I estimate my model with the following
> > command:
> > 
> > xtivreg y x1 (x2 x3 = z2 z3), fe
> > 
> > When I do "dmexogxt", the null hypothesis that all regressors are 
> > exogenous ism clearly rejected. However, when I do 
> "dmexogxt x2" and 
> > "dmexogxt x3", I definitly can't reject the null for either 
> x2 or x3 
> > at the same level.
> > 
> > How can I interpret these results?
> > 
> > *** When you run the command dmexogxt x2, you are assuming 
> that x3 is 
> > definitely endogenous and are only testing that x2 is 
> exogenous given 
> > this assumption.  For whatever reason, in your example, you cannot 
> > clearly distinguish between (x2 endog, x3 exog), (x2 exog, 
> x3 endog), 
> > or (both endog).  Since you do not seem to have a reason to assume 
> > either one is definitely endogenous (thus, leading to the reduced 
> > test), my instinct would be that you are best off treating both as 
> > being endogenous.
> 
> The text here can be interpreted in the same way as a Hausman 
> test, i.e., endogeneity/exogeneity is picked up by 
> differences in the coefficients between the two 
> specifications.  In effect, when you set one or the other of 
> x2 and x3 to be exogenous, the coeffs don't change much 
> compared to the benchmark case where both are endogeneous.  
> But when you set both to be exogenous, the coeffs change a 
> lot, again compared to the case of both being endogenous.  
> This doesn't sound very strange, at least to me. 
>  
> > 2) After "xtivreg y x1 (x2 = z2 ), fe", both "dmexogxt" and 
> "dmexogxt 
> > x2" yield F-statistics.
> > 
> > *** with only one possible endogenous variable, "dmexogxt" and 
> > "dmexogxt x2" are identical tests and thus give identical results
> > 
> > After "xtivreg y x1 (x2 x3 = z2 z3), fe", both "dmexogxt" 
> still gives 
> > an F-statistic, but "dmexogxt x2" yields a chi2(1). Why is 
> that? Is a 
> > Wald test used in the second case, and if so why?
> > 
> > *** more generally, if "dmexogxt" is only run on a subset of 
> > endogenous variables you will end up with a chi2(number tested 
> > variables) instead of an f-test.  This occurs because the auxiliary 
> > regression being run for the test is now an IV regression (we still 
> > need to instrument for the variables left out of the test) 
> as opposed 
> > to an OLS regression (the case when all possible endogenous 
> variables are being tested).
> 
> ... and the Wu version of the test has an F-stat form in this case.  
> But if you're relying on asymptotics, it doesn't matter if 
> it's an F or chi-sq.  If you want an F-stat instead of a 
> chi-sq, you can always get one by hand if you divide by the 
> relevant dof.
> 
> Cheers,
> Mark
> 
> > Thanks a lot.
> > 
> > Jean Salvati
> > 
> > 
> > *
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> > 
> > 
> 
> Prof. Mark E. Schaffer
> Director
> Centre for Economic Reform and Transformation Department of 
> Economics School of Management & Languages Heriot-Watt 
> University, Edinburgh EH14 4AS  UK
> 44-131-451-3494 direct
> 44-131-451-3008 fax
> 44-131-451-3485 CERT administrator
> http://www.som.hw.ac.uk/cert
> 
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> 
> 

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