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From |
"Salvati, Jean" <[email protected]> |

To |
<[email protected]> |

Subject |
st: RE: xtabond machinations |

Date |
Wed, 8 Dec 2004 16:38:07 -0500 |

> 1) I thought that <xtabond> would run the following 4 > regressions in the first stage: > > y2-y1 = a * y1 + b * x1 --> predict y2-y1 > x2-x1 = a * y1 + b * x1 --> predict x2-x1 > > y3 - y2 = a * y1 + b * y2 + c * x1 + d * x2 --> predict y3 - y2 > x3 - x2 = a * y1 + b * y2 + c * x1 + d * x2 --> predict x3 - x2 > > Then I thought it would use those predictions in the second > stage to estimate the first eqn above. When carry out these > steps manually, however, I don't get the same results as when > I just use <xtabond>. The code for using <xtabond> would look > like this: > > ge x_lag = L.x > xtabond y, pre(x_lag, endog) This is not at all what xtabond does. > Which part of what <xtabond> am I misunderstanding? xtabond is a GMM estimator with "dynamic" instruments. The instruments are "dynamic" in the sense that there are more instruments available at time t than at time t-1. The instruments for all time periods are used to establish moment/orthogonality conditions. These moment conditions are stacked in a vector. The square norm of this vector is minimized (you want the left hand side of the moment conditions to be as close to 0 as possible). The first-order conditions of the minimization problem form a system that can be solved for the model's coefficients (assuming that you have at least as many non-colinear instruments as parameters to estimate). > 2) If x(t) is predetermined instead of endog in my model, > there is no need to instrument for x(t-1) - x(t-2). Will > Stata know this? It's your responsibility to tell xtabond whether x is predetermined, endogenous, or exogenous. How to do this is explained in the doc. Exogenous regressors can (and should) be used as instruments (for themselves). xtabond automatically does that. I hope this helps. I'm not sure about your other questions. Jean Salvati * * 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/

**Follow-Ups**:**Re: st: RE: xtabond machinations***From:*Danielle H Ferry <[email protected]>

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