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st: The Sargan test in -xtabond(2)-

From   "Clive Nicholas" <[email protected]>
To   [email protected]
Subject   st: The Sargan test in -xtabond(2)-
Date   Wed, 4 Aug 2004 11:11:57 +0100 (BST)

Kostas Drakos wrote:

> I am estimating a dynamic panel using the GMM Arellano-Bond routine.
> It's proved impossible so far to find an instrument set that will
> satisfy the Sargan test. How crucial is the significance of the Sargan
> test?

First of all, use a germane subject heading!

Second of all, you didn't say whether you're using -xtabond- or
-xtabond2-. I know this is a bit naughty to say, but if one doesn't give
you the 'right' Sargan test statistic, why not try the other? (It is, of
course, Hansen's J in -xtabond2-.)

I've had this trouble myself recently, but managed to be creative with the
instruments I used to satisfy the J test. From what I've learned off
others, this test is pretty crucial as it provides a strong indication
that the instruments you're using are invalid.

CLIVE NICHOLAS        |t: 0(044)191 222 5969
Politics              |e: [email protected]
Newcastle University  |
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