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From |
"Mark Schaffer" <M.E.Schaffer@hw.ac.uk> |

To |
statalist@hsphsun2.harvard.edu |

Subject |
Re: st: xtabond |

Date |
Tue, 16 Sep 2003 18:23:10 +0100 |

Mine, Date sent: Tue, 16 Sep 2003 13:00:46 -0400 (EDT) From: Mine Zeynep Senses <msenses@umich.edu> To: <statalist@hsphsun2.harvard.edu> Subject: Re: st: xtabond Send reply to: statalist@hsphsun2.harvard.edu > yes!!! this makes a lot of sense!!! and I think thats the thing I was > trying to get at initialy... yeardum* cash_k: the valid instrument is > yeardum*cash_klag(1), yeardum*cash_klag(2)... which is as you say exactly > the same as using lags of cash as instruments!!! your explanation made me > better understand why this is the case!! seperate thanks for that... > > do you know if I can do that with stata??? I think stata does not let you > specify the instruments that way... but I am not sure... > thanks again... To be honest, I'm not sure about this - I've never had occasion to use xtabond seriously. It might be the case that this is, in effect, done automatically if your predetermined regressors include cash_k and you drop one of the dummy year*cash_k interactions. If you do this, and maxlags is the default so that all lags are being used, then you will have some collinearities among the lags of cash_k and all the yearcash_k interactions (including some variables that are all zeros for a given year). But Stata is pretty clever at dropping collinear variables. If you're lucky then what xtabond will do is drop all the collinear cash_k and yearcash_k interactions when constructing the instrument set, and the ones that survive will be the lags that you want. You ought to be able to count the degrees of freedom of the Sargan test and confirm that this is what is happening. Hope this helps. --Mark NB: Any Arellano-Bond experts out there who want to comment on this? > mine > > PS: Also adding the interaction variable, makes cash_k variable in the > regression redundant, it looks like. Am I write on that? > > > I think this is the key point. What is the appropriate set of lags > > for the interaction of year and cash_k? > > > > My first reaction would be to say lag(1) of year * lag(1) of cash_k = > > lag(1) of cash_k, lag(2) of year * lag(2) of cash_k = lag(2) of > > cash_k, and so forth. That is, if the year dummy = 1 this year, then > > the lagged dummy = 1 last year. This implies that you can't use lags > > of interacted variable yearcash_k for instruments, you use lags of > > the uninteracted cash_k instead. > > > > Does this make sense? > > > > --Mark > > > > > 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 > > > > > > > > > > * > > > > > * For searches and help try: > > > > > * http://www.stata.com/support/faqs/res/findit.html > > > > > * http://www.stata.com/support/statalist/faq > > > > > * http://www.ats.ucla.edu/stat/stata/ > > > > > > > > > > > > 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 > > > > * > > > > * For searches and help try: > > > > * http://www.stata.com/support/faqs/res/findit.html > > > > * http://www.stata.com/support/statalist/faq > > > > * http://www.ats.ucla.edu/stat/stata/ > > > > > > > > > > * > > > * For searches and help try: > > > * http://www.stata.com/support/faqs/res/findit.html > > > * http://www.stata.com/support/statalist/faq > > > * http://www.ats.ucla.edu/stat/stata/ > > > > > > 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 > > * > > * For searches and help try: > > * http://www.stata.com/support/faqs/res/findit.html > > * http://www.stata.com/support/statalist/faq > > * http://www.ats.ucla.edu/stat/stata/ > > > > > * > * For searches and help try: > * http://www.stata.com/support/faqs/res/findit.html > * http://www.stata.com/support/statalist/faq > * http://www.ats.ucla.edu/stat/stata/ 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 * * For searches and help try: * http://www.stata.com/support/faqs/res/findit.html * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/

**References**:**Re: st: xtabond***From:*"Mark Schaffer" <M.E.Schaffer@hw.ac.uk>

**Re: st: xtabond***From:*Mine Zeynep Senses <msenses@umich.edu>

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