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From |
Robert A Yaffee <bob.yaffee@nyu.edu> |

To |
statalist@hsphsun2.harvard.edu |

Subject |
Re: Re: st: fully modified OLS and dynamic OLS |

Date |
Wed, 18 Mar 2009 23:25:23 -0400 |

Peter, The fully modified OLS was developed by Phillips and Hansen in 1990. Their option corrects for endogeneity and serial correlation. The Newey-West option is the closest thing to that but it does not necessarily correct for endogeneity in a multivariate system. Perhaps the 3sls in the reg3 command would give you a close approximation. - Regards, Bob Yaffee Robert A. Yaffee, Ph.D. Research Professor Silver School of Social Work New York University Biosketch: http://homepages.nyu.edu/~ray1/Biosketch2008.pdf CV: http://homepages.nyu.edu/~ray1/vita.pdf ----- Original Message ----- From: Grant Peter Kabango <g.kabango.1@research.gla.ac.uk> Date: Wednesday, March 18, 2009 10:09 pm Subject: Re: Re: st: fully modified OLS and dynamic OLS To: statalist@hsphsun2.harvard.edu > Thank you Michael. > > Grant > > -----Original Message----- > From: Michael Hanson <mshanson@mac.com> > To: statalist@hsphsun2.harvard.edu > Date: Wed, 18 Mar 2009 21:57:12 -0400 > Subject: Re: st: fully modified OLS and dynamic OLS > > On Mar 18, 2009, at 6:37 PM, Grant Peter Kabango wrote: > > > I would like to estimate using the fully modified OLS (FMOLS) and > > dynamic OLS (DOLS), and I wish to find out the Stata command for > > these processes. > > > On Mar 18, 2009, at 7:01 PM, Martin Weiss wrote: > > > -findit- does not return any results. Are these procedures known > > under any other name? > > > The short answers are no (to Grant: "Are FM-OLS or DOLS currently > implemented in Stata?") and no (to Martin: "Are they known by other > names?"). Note that this request and the corresponding response > about alternative names reappear on Statalist roughly every year or > two (and apparently has been more popular recently): > > < > < > < > < > < > > > FM-OLS and DOLS are single equation estimators for cointegrated > relationships. Given that this is a fairly specialized topic in time > > series analysis, I don't believe they can be found in other > Stata .ado files under different names. (Although I would be happy > to be proven wrong on that point.) > > Dynamic OLS is quite easy to implement in Stata, since it just > involves augmenting a (super-consistent) OLS estimate of the > cointegrating relationship with leads and lags of the RHS variable. > > For appropriate inference, HAC standard errors must be used. Below > is a simple (and very stylized) example. Note that this example uses > > both -ivreg2- and -freduse-, which are available from SSC. > > > // Begin example > > clear > freduse GDPC96 PCECC96 > gen t = qofd(daten) > format t %tq > drop date* > tsset t > > gen y = ln(GDPC96) > gen c = ln(PCECC96) > > ivreg2 c y L(-4/4)D.y, bw(auto) robust > ivregress 2sls c y L(-4/4)D.y, vce(hac nw opt) > > // End example > > The coefficient on y in each regression will be the estimate of the > parameter B in the cointegrating vector [1 -B], such that [c y] [1 - > B]' ~ I(0). Note that -ivreg2- will work with Stata 9 or better > (once installed); -ivregress- was introduced in Stata 10. They > should return identical results in the above example. > > > The FM-OLS estimator is a little more sophisticated, and -- as far as > > I can tell -- no one has contributed a user-written version. Thus, > your options are (1) write it yourself (see the references below -- > would be a good exercise to implement in Mata); (2) use a system > estimator (such as -vec-); or (3) use a different statistical > package. (For example, FM-OLS has been implemented in RATS: see > <http://www.estima.com/ > procs_perl/panelfm.src>. Procedures may also have been written for > R, but a quick search did not turn up anything.) > > Hope this helps. Perhaps the next time someone looks for the DOLS or > > FM-OLS estimators, they will search the mailing list archive first. > > -- Mike > > > References: > > Banerjee, Anindya, et al, "Co-integration, Error-Correction, and the > > Econometric Analysis of Non-Stationary Data," Oxford University > Press, 1993. > > Maddala, G.S. and In-Moo Kim, "Unit Roots, Cointegration, and > Structural Change," Cambridge University Press, 1998. > > Phillips, Peter and Bruce Hansen, "Statistical Inference in > Instrumental Variables Regression with I(1) Processes," Review of > Economic Studies, v.57, 1990, pp. 99-125. > > Phillips, Peter, "Fully Modified Least Squares and Vector > Autoregression," Econometrica, v.63 n.5, 1995, pp. 1023-1078. > > Stock, James and Mark Watson, "A Simple Estimator of Cointegrating > Vectors in Higher Order Integrated Systems," Econometrica, v.61 n.4, > > 1993, pp. 783-820. > > * > * For searches and help try: > * http://www.stata.com/help.cgi?search > * http://www.stata.com/support/statalist/faq > * http://www.ats.ucla.edu/stat/stata/ > > > > > * > * For searches and help try: > * http://www.stata.com/help.cgi?search > * http://www.stata.com/support/statalist/faq > * http://www.ats.ucla.edu/stat/stata/ * * For searches and help try: * http://www.stata.com/help.cgi?search * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/

**Follow-Ups**:**Re: st: fully modified OLS and dynamic OLS***From:*Michael Hanson <mshanson@mac.com>

**References**:**Re: Re: st: fully modified OLS and dynamic OLS***From:*"Grant Peter Kabango" <g.kabango.1@research.gla.ac.uk>

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