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Re: st: instrumenting Moving average variable


From   San K <devank@gmail.com>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: instrumenting Moving average variable
Date   Tue, 5 Jun 2012 11:37:11 +1000

First of all Im not an econometrician.
You said you are using 3 year MA. That means your ‘y’ has U(t), U(t-1)
and U(t-2). Your l.y has U(t-1),U(t-2) and U(t-3). Hence, you have
endogeneity problem.

Now, can you use the Lag3 as instrument? I don’t think you can as your
l.y includes the lag 3.

I think you are artificially smoothing out the data by taking 3 year
MA. It kills off any year to year variations. Also you are loosing
valuable 2 time points.

As I said I'm not an econometrician so I could be wrong and you would
know your data better.

Regards,
San K




On Tue, Jun 5, 2012 at 5:53 AM, Søren Møller-Larsson
<soren_ml@hotmail.com> wrote:
> Thank you for taking your time. I apologize  for being so imprecise. Panel data yes. T=20 annual data. N=46 countries. Just the one independent variable is a 3-year MA while the rest including the dependent variable are single year observations.
>
> Regards Soren
>
> ----------------------------------------
>> From: perez.jorge@ur.edu.co
>> Date: Mon, 4 Jun 2012 14:04:59 -0400
>> Subject: Re: st: instrumenting Moving average variable
>> To: statalist@hsphsun2.harvard.edu
>>
>> Sorry, it is still not clear to me whether you have panel data or not.
>> _______________________
>> Jorge Eduardo Pérez Pérez
>>
>>
>> On Mon, Jun 4, 2012 at 12:18 PM, Søren Møller-Larsson
>> <soren_ml@hotmail.com> wrote:
>> > Dear Jorge
>> >
>> > Thank you for replying. Yes I am estimating a dynamic model. Sorry for not mentioning the whole story. I am estimating with system GMM and I want to test whether my instruments are weak with the first stage statistics of -ivreg2-. In the system GMM setting I am considering treating the 3-year MA variable as predetermined and instrumenting it with lags 3 and longer, but I am not completely sure if this is the way to go about it either.
>> >
>> > However, my main question is still how the MA variable should be treated in the -ivreg2- setting.
>> >
>> > Regards Soren
>> >
>> > ----------------------------------------
>> >> From: perez.jorge@ur.edu.co
>> >> Date: Mon, 4 Jun 2012 11:53:30 -0400
>> >> Subject: Re: st: instrumenting Moving average variable
>> >> To: statalist@hsphsun2.harvard.edu
>> >>
>> >> Are you trying to estimate a dynamic panel data model? If not, why is
>> >> l.y endogenous?
>> >> _______________________
>> >> Jorge Eduardo Pérez Pérez
>> >>
>> >>
>> >> On Mon, Jun 4, 2012 at 8:17 AM, Søren Møller-Larsson
>> >> <soren_ml@hotmail.com> wrote:
>> >> > Dear statalisters
>> >> >
>> >> > I have an dependent variable y, the l.y serves as an explanatory variable and will be instrumented with l2.y. Furthermore I have and a set of exogenous variables x.
>> >> > I use annual data.
>> >> > One of the seemingly exogenous variables are used in 3-year Moving averages resulting in overlapping periods. Therefore I reckon it cannot be interpreted as exogenous anymore and I consider instrumenting it with its third lag or alternatively a lagged excluded instrument.
>> >> >
>> >> > I want to perform the various first-stage tests of either ivreg2 or xtivreg2 to check the instrument validity. How should the 3-year MA variable be treated in a regression like the one below?
>> >> >
>> >> > ivreg2 y x (l.y = l2.y), first ffirst robust gmm2s
>> >> >
>> >> > Any help is appreciated. thanks
>> >> >
>> >> > Regards Soren
>> >> > Aarhus university
>> >> >
>> >> > *
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