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st: RE: Prober Instrument for GMM xtabond2


From   "Jo Gardener" <1243go@gmx.net>
To   statalist@hsphsun2.harvard.edu
Subject   st: RE: Prober Instrument for GMM xtabond2
Date   Mon, 17 Jul 2006 11:28:37 +0200

The mail again with a subject in the mail header.
--------------------------------------
Thanks for your answer, M. Parameswaran.
However, I do not know if it is really that easy.

For instance if you have an AR(2) model like y=a1+a2*y(t-2)+...
and the output gives shows you that there is 
autocorrelation of 1., 2., and 3. order 
but no autocorrelation of 4. order and onwards.

Then, referring to you, I can use instruments of lag(4)-onwards for GMM-estimation.

But Arellano-Bond and in other books it is stated (for an AR(1) model though), that the AR(1) is no problem because the differenced residuals are expected to follow an MA(1) process but if there is AR(2) autocorrelation, than the GMM-estimator is inconsistent.

So the question should be: Is the AR(2) autocorrelation always a sign, that the GMM-estimation is inconsistent (no matter if the original model is an AR(1), AR(2) or AR(3) model) or does it really depend on the instruments I use?

I think this question is not only important to me, but to many others that use the GMM-estimator and do not get a response from literature.

Jo

-------- Original-Nachricht --------
Datum: Mon, 17 Jul 2006 13:58:54 +0530
Von: "M.Parameswaran" <mpeswaran@gmail.com>
An: statalist@hsphsun2.harvard.edu
Betreff: st: Re:

> If there are second order serial correlation, then second lags are not
> valid instruments, in this case one has to use 3rd lag onwards.
> 
> Parameswaran
> 
> On 17/07/06, Jo Gardener <1243go@gmx.net> wrote:
> > Dear all,
> >
> > using a simple dynamic model (DPD) I currently face following problem:
> >
> > Model: y=a1+a2*y(t-1)+ ...
> > xi: xtabond2 y l.y i.year, gmm(y, lag(3!! 4) equ(both) coll) iv(i.year,
> equ(both)) small rob twostep arte(3)
> >
> > I use gmm(y, lag(3 4) and not lag(2 4) because the AB-Test for AR(2) -
> not shown here - says that there is autocorrlation of second order. Thus I
> cannot use lag(2) as instrument.
> > However, my question: Can I use lag(3 4), because the 3rd lag is not
> correlated with the differenced error term?
> >
> > Following output of the lag(3 4) estimation says, that the differenced
> residuals show no AR(3) correlation and the Hansen J is ok:
> > Hansen test of overid. restr.: chi2(3) =   3,72     Prob > chi2 =  0,432
> > Arellano-Bond test for AR(1) in first diff: z =  -5,76  Pr > z =  0,000
> > Arellano-Bond test for AR(2) in first diff: z =   2,21  Pr > z =  0,042
> > Arellano-Bond test for AR(3) in first diff: z =  -0,75  Pr > z =  0,433
> >
> > I am glad for any response I can get on this issue
> > Jo gardener
> >
> > --
> >
> > --
> >
> >
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> >
> 
> 
> -- 
> ___________________________________
> M. Parameswaran,
> Research Associate,
> Centre for Development Studies,
> Prasanth Nagar Road, Ulloor.
> Trivandrum - 695 011,
> Kerala, India.
> Phone: +91-471-2448881 (O)
>             +91 - 09446506388 (mobile)
> e-mail: parameswaran@cds.ac.in
>            mpeswaran@gmail.com
> 
> *
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