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Re: st: xtabond


From   Mine Zeynep Senses <msenses@umich.edu>
To   <statalist@hsphsun2.harvard.edu>
Subject   Re: st: xtabond
Date   Tue, 16 Sep 2003 12:08:31 -0400 (EDT)

Mark,
Thats how I did it initially but I don't think its right to do it that
way. Because year dummies are strictly exogenous and there is no need to
instrument for them. Plus lag of the interaction variable will always be
zero because of the year dummy, so I am not even sure if it is a valid
instrument... In the literature people usually interact cash variable with
a size dummy or something, which is time invariant, and then there is no
problem doing it that way...
But if you think I am not right on this, Iwill be happy to hear why since
I got very good results doing it that way and I will be happy to keep
those results!!!
best,
mine

> > > I have a question regarding the xtabond command. I am using:
> > > xi: xtabond  investment_2, lags(1) maxlags(3) pre(sales_k, lag(0,3))
> > > pre(cash_k, lag(0,3)) diffvars(i.year i.industry)
> > >
> > > I want to add an interaction variable:  year*cash_k. Year is a dummy
> > > variable and cash_k is predetermined. So what i would like is to
> > > instrument this variable with year*cash_k(lag) etc. Defining it
> > > predetermined will use (year*cash_k)(lag) which is probably not right.
>
> Can you explain why you think this isn't right?  Put another way, I
> don't see why you can't define a new variable called yearcash_k which
> is the interaction of year and cash_k and simply work with that.


>
> --Mark
>
> > >
> > > is there a way to do this? I will appreciate any help.
> > > mine
> >
> > *
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>
>
> Prof. Mark E. Schaffer
> Director
> Centre for Economic Reform and Transformation
> Department of Economics
> School of Management & Languages
> Heriot-Watt University, Edinburgh EH14 4AS  UK
> 44-131-451-3494 direct
> 44-131-451-3008 fax
> 44-131-451-3485 CERT administrator
> http://www.som.hw.ac.uk/cert
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>

*
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