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st: re: GMM and systems of structural equations


From   Kit Baum <baum@bc.edu>
To   statalist@hsphsun2.harvard.edu
Subject   st: re: GMM and systems of structural equations
Date   Sun, 27 May 2007 17:31:56 -0400

sacrificial faq

Fausto said

I have this model:
y(t)=b0*y(t-1)+b1*X(t)+b2*Z(t)
Z(t)=a0*Z(t-1)+a1*W(t)

This model is a panel data with 5 thousands individuals in 10 years. If
this is not a system, I could estimate for arellano an bond, but the problem
arise when I need to use a systems endogenous equations. So, my doubt is if
is there a program which it permits to use a arellano and bond and systems
endogenous equations for panel estimation?
Could someone help in this subject?


Estimation of each of these equations with Arellano-Bond (eg xtabond2) would be perfectly appropriate. There are no cross-equation constraints. It is a common misconception that if you can write down a system of equations (in this case a recursive system) you need a systems estimator. Systems estimators potentally gain efficiency; they are not needed for consistency. "Limited information" estimation, that is, estimating each equation separately with xtabond2 -- is just fine here. In the absence of cross-equation constraints, you never 'need' to use a systems estimator.



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


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