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Re: st: Ivreg2 & -bw- option

From   Mark Schaffer <[email protected]>
To   [email protected], Cordula Stolberg <[email protected]>
Subject   Re: st: Ivreg2 & -bw- option
Date   Wed, 18 Aug 2004 20:26:04 +0100 (BST)


Quoting Cordula Stolberg <[email protected]>:

> Dear Statalisters,
> I have some problems with the -bw(#)- option in -ivreg2-. I have an
> unbalanced (fixed effects) model and I suspect one variable to be 
> endogenous. I used -ivreg2- and then found autocorrelation. When I
> tried to 
> correct for that with the -bw- option, I always got the error
> message
> "estimated variance-covariance matrix not positive definite"
> Is that because I have missing observations in my panel?

Probably not.  VCVs that aren't positive definite are something you can 
run into when you use kernel-based estimates, unless you use one that is 
guaranteed to be PD.  Try using the Barlett kernel (the default for ivreg2 
with the -bw- option) in combination with the -robust- option.  This is 
also known as the Newey-West estimator and is guaranteed to be PD.  If you 
still get the error, then something else is going wrong.


> Any
> suggestions 
> would be appreciated.
> Thanks,
> Cordula
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Prof. Mark Schaffer
Director, CERT
Department of Economics
School of Management & Languages
Heriot-Watt University, Edinburgh EH14 4AS
tel +44-131-451-3494 / fax +44-131-451-3008
email: [email protected]


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