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st: Re: reg3 or xt...


From   Kit Baum <baum@bc.edu>
To   statalist@hsphsun2.harvard.edu
Subject   st: Re: reg3 or xt...
Date   Sat, 24 Feb 2007 10:29:10 -0500

You are not missing anything. None of the equations contain endogenous variables, from the looks of it. But as some of the equations are dynamic equations, it is likely that neither fixed effects nor random effects (nor OLS first differences) will work. You need to use an instrumental variables technique--either something like the Anderson-Hsiao estimator of xtivreg, or depending on the length of your panels, a dynamic panel data estimator such as xtabond (or better yet xtabond2).

There is no reason to consider this model as a system unless you are trying to test or impose cross-equation constraints.

Kit Baum, Boston College Economics
http://ideas.repec.org/e/pba1.html
An Introduction to Modern Econometrics Using Stata:
http://www.stata-press.com/books/imeus.html


On Feb 24, 2007, at 2:33 AM, Rajiv wrote:


I had earlier sent the message below to statalist. However, a few
minutes ago, it struck me that the equations I have may not be a
"simultaneous equation model" at all. This is based partly on Kit
Baum's message on http://www.stata.com/statalist/archive/2004-03/
msg01120.html.

In our model (given below), none of the endogeneous variables affect
each other at that time. All the variables on the right-hand sides of
all equations are either exogneous of lagged-endogeneous (i.e., pre-
determined).

Therefore, it would seem that simple panel regressions, rather than
simultaneous models, would be appropriate. Am I missing something?

Thanks, and best wishes,

Rajiv

On Feb 23, 2007, at 1:25 PM, Rajiv Sabherwal wrote:

Hello,

A PhD student and I are trying to test a model containing
simultaneous equations such as the following:

y1(t) = a1 + b11*y1(t-1) + b12*y2(t-1) +b13*y3(t-1) + b14*y4(t-1) +
b15*y5(t-1) + b16*x1 + b17*x2
y2(t) = a2 + b21*y2(t-1) + b23*y3(t-1) + b24*y4(t-1) + b25*y5(t-1)
+ b26*x1 + b27*x2
y3(t) = a3 + b31*x3 + b32*x4 +b33*x5
y4(t) = a4 + b41*x6 + b42*x7
y5(t) = a5 + b51*x8 + b52*x9
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