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Re: st: RE: can Arellano-Bover estimator be used when some regressors or the dependent variable contain a unit root?


From   sabbas gidarokostas <sabbasgidarokostas@googlemail.com>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: RE: can Arellano-Bover estimator be used when some regressors or the dependent variable contain a unit root?
Date   Tue, 19 Jun 2012 18:42:40 +0100

thank you Mark for your reply.

I looked at the command -xtabond2-, Do you think that -xtabond2 will
"automatically solve the problem of non stationarity? Because if not,
then xtabond2 has not other option available  that could cure this
problem.

thank you

On 6/19/12, Hintz, Mark <Mark_Hintz@mentor.com> wrote:
> I think you'll need to take the first difference first, then use the
> differences in your model. The model uses the first differences to find the
> moment conditions, but it's fundamentally estimating the undifferenced
> model, which is nonstationary. I think you want the estimated model to
> reflect a stationary process, so you'll need to feed the stationary
> first-differenced series into the Arellano-Bover estimator.
>
> -----Original Message-----
> From: owner-statalist@hsphsun2.harvard.edu
> [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of sabbas
> gidarokostas
> Sent: Monday, June 18, 2012 5:02 PM
> To: statalist
> Subject: st: can Arellano-Bover estimator be used when some regressors or
> the dependent variable contain a unit root?
>
> Dear all,
>
> I have a dynamic panel regression with fixed effects and using the
> xtunitroot iip i found that some variables contain unit root. Is is still
> valid to use Arellano-Bover estimator?
> I think yes because we take the first difference. Am i right?
>
> cheers
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