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st: Newey-West in GMM


From   Andrea Molinari <am30@sussex.ac.uk>
To   statalist@hsphsun2.harvard.edu
Subject   st: Newey-West in GMM
Date   Mon, 28 Nov 2005 20:05:14 +0000

Dear Statalisters,

I am trying to run a GMM model on a pooled OLS data (420 individuals 
over 22 years.  After running some tests, it seems that I need to 
correct for with a Newey-West AR(1) and heteroscedasticity 
corrections. 

Hence, I tried the following syntax:

ivreg2 $paper (lreppaperg lrecpaperg dbrcapaper = l.lrgdp95x 
l.lrgdp95m l.rcapaperx l.lreppaperg), bw(2) gmm


...Stata gives me a couple of lines:

Warning - collinearities detected
Vars dropped:  d99

...and then the following error:

Error: estimated covariance matrix of moment conditions not of full 
rank;
cannot calculate optimal weighting matrix for GMM estimation.
Possible causes:
  estimated covariance matrix of moment conditions not positive 
definite
  estimated covariance matrix uses too many lags
  singleton dummy variable (dummy with 1 one and N-1 zeros or visa-
versa)
r(498);

Has anyone got any suggestions on other ways to correct for serial 
correlation and heteroscedasticity when this problem arises?

Many thanks in advance!

Andrea

 
Andrea Molinari
PhD in Economics student
University of Sussex
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