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


From   "Dithmer, Jan" <jdithme@food-econ.uni-kiel.de>
To   "statalist@hsphsun2.harvard.edu" <statalist@hsphsun2.harvard.edu>
Subject   AW: st: RE: can Arellano-Bover estimator be used when some regressors or the dependent variable contain a unit root?
Date   Wed, 20 Jun 2012 11:49:19 +0200

Dear Sabbas,

I would send this question directly to the author of the program xtabond2.

Maybe you can ask him to post the answer on statalist, as it may be interesting for others as well.

Best, Jan

-----Ursprüngliche Nachricht-----
Von: owner-statalist@hsphsun2.harvard.edu [mailto:owner-statalist@hsphsun2.harvard.edu] Im Auftrag von sabbas gidarokostas
Gesendet: Tuesday, June 19, 2012 7:43 PM
An: statalist@hsphsun2.harvard.edu
Betreff: Re: st: RE: can Arellano-Bover estimator be used when some regressors or the dependent variable contain a unit root?

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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