That is correct, I suppose, in the sense that every excluded
instrument is used to form the linear projection, but you will
certainly want to use ivreg2 (type -ssc install ivreg2- to get it) and
check that you do not have "weak instruments." Even if you pass the
Stock & Yogo test, I would be suspicious that your equation is
underidentified, and you might also have a hard time convincing anyone
that the lag of Z and powers thereof do not affect Y (except through
the effect on current Z) but the current values do. Depends on your
model, I suppose.
On 4/5/06, Philip Rego <philip.rego@gmail.com> wrote:
> Hi,
> I want to estimate a model of this sort.
> Y=constant+c1(z)+c2(z-square)+c3(z-cubed)+error
> I want to use IV-reg approach where lag of Z (i.e lag of Z, lag of
> z-square, lag of z-cube) are the exogenous variable. My question:
> in stata i am writing command like this:
>
> ivreg y independent variable (z z-square z-cubed=lag of Z, lag of
> z-square, lag of z-cube)
>
> Is it right?
> In this way, even z-square's predictors are lag of Z, lag of z-square,
> lag of z-cube and so also for z-cubed.
>
> is it ok.
> best,
> philip
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