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Re: st: instrumental variable estimation problems


From   Tunga Kantarci <tungakantarci@hotmail.com>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: instrumental variable estimation problems
Date   Mon, 7 Dec 2009 12:12:35 +0100

Hello,

* Regarding Question 1: In fact, my question is slightly wrong but I still
think that it has nothing to do with the ivreg or ivreg2 command. Let me
state my question again. 

The model is the following. depend = b1 + b2 endo + u. I have two
instruments for endo and I want to test if they are exogenous. The idea of
the test is that you regress the residuals from this model (using iv
estimates of b1 and b2) on the instruments to see if the instruments have
explanatory power. Hence the steps are as follows:
Step 1. Obtain the IV estimates of b1 and b2. Here I use ivregress 2sls
depend (endo = instone insttwo).
Step 2. Obtain the residuals. Here the point is that I wish to get the
residuals using these two iv estimates and the variable 'endo' and NOT the
'predicted endo' from the first stage of the 2SLS. Is it ok if I just use
the command "predict resid, residuals"? Or is this command producing
residuals using the IV estimates of b1 and b2 and the variable 'predicted
endo'? This question is not about the updated ivreg command. It is about
getting the correct residuals. (Note: there can be a direct, ready-made test
for instrument exogeneity but I don't want to follow them. The test I am
following here is intuitive and therefore I wish to follow the steps I lay
down here.)

* Regarding Question 2 and 3: I appreciate your answers. They indeed answer
these two questions. My whole confusion arised from a simple guess: I tought
ivreg was shorthand for ivregress, as is reg for regress. Now I see that
ivreg is outdated and the whole issue of ivregress and ivreg2 follows. It is
rather me who created some confusion here. Thank you and to Ekrem. 

Tunga


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