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Re: st: Why won't my LDV correlate with the model error?

From   "Clive Nicholas" <[email protected]>
To   [email protected]
Subject   Re: st: Why won't my LDV correlate with the model error?
Date   Tue, 26 Oct 2004 04:57:30 +0100 (BST)

Michael S. Hanson replied:

> I don't find the results odd, but I am a little uncertain what you are
> trying to do in the first place.  Your initial statement:
>> In preparing to muck around with some -ivreg2- test code, I've been
>> running some basic lagged-DV regressions in order to introduce an
>> instrument into an IV regression.
> unclear to me.  Perhaps I am not understanding your intentions.
> How do you see these regressions helping you to "introduce an
> instrument"?

Essentially, I volunteered to test out some test code for -ivreg2-, so in
preparation, I ran some OLS regressions in order to segue to an IV
regression. I didn't just want to chuck in any old rubbish as an
instrument: I wanted to execute this properly so that I could run an IV
regression that even I could follow (I was intending to use a deliberately
omitted variable such as tax levels as the instrument).

I seem to remember you putting me right on this some months back.
Apologies for forgetting this. If I remember rightly, you remarked that
the LDV is 'presumed' to be problematic in a standard econometric model,
and so the next natural step is to move onto the IV regression to use an
'omitted' variable to instrument with the LDV. Either that, or I picked
this up from my reading or from somebody else on this list.

Thanks once again for the full reply. :)

CLIVE NICHOLAS        |t: 0(044)7903 397793
Politics              |e: [email protected]
Newcastle University  |
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