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st: xtabond2 with interaction terms


From   "Carrion-Menendez, Alejandro" <ACarrionMenendez@imf.org>
To   "statalist@hsphsun2.harvard.edu" <statalist@hsphsun2.harvard.edu>
Subject   st: xtabond2 with interaction terms
Date   Tue, 5 Apr 2011 10:20:15 -0400

I have a model with continuous interaction terms. I'm having trouble setting up the specification for xtabond2 and I haven't found anything in the literature that refers to this issue.

My interactions are basically the product of the constitutive terms (fxratio_ct fxclass1_ct concentrationdummy depgdp_ct) and the variable of interest (policy_ct). 

Should I follow Roodman's advice of including every regressor into the instrument matrix? Or should I exclude either the interactions or the constitutive terms by default?

xtabond2 lending l.lending policy_ct fxratio_ct fxclass1_ct concentrationdummy depgdp_ct fxratio_p fxv_p dep_p cdummy_p year*, gmm(policy_ct lending fxratio_p fxv_p dep_p cdummy_p  fxratio_ct depgdp_ct fxclass1_ct  concentrationdummy  , collapse lag(1 2)) iv(  year*)small twostep robust 

Thanks!


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