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

To |
<[email protected]> |

Subject |
st: Orthogonal deviations GMM DPD estimator? |

Date |
Tue, 14 Dec 2004 18:16:42 -0500 |

Hello, By any chance, has anyone tried to implement the orthogonal deviations (OD) GMM DPD estimator in Stata? This estimator is discussed for example in Arellano and Bover (1995) and Alvarez and Arellano (2003). I've started writing a Stata program that implements this estimator, but I'm having some issues. This estimator is implemented in Ox and in Eviews 5. However the Ox and Eviews implementation don't seem to yield the same results (but it's possible that I didn't correctly specify the model in Ox), and I can't match either the Ox results or the Eviews results with my Stata program. Using first-differences instead of OD in my program, I was able to match the xtabond and xtabond2 results. Therefore I am *quite* confident in my code. However, it seems that there are more judgment calls to be made in the OD implementation than in the FD implementation. In particular, there may be more than one way of computing the orthogonal deviations themselves. Here is how I do it: - For each variable and for each period, compute the average of all existing leads. - To compute this average, use the actual number of available leads in the sample (let's call this number n_leads). - Compute the difference between the current value of the variable and the average of all its available leads: gen od_x_temp = x - avg_leads_of_x - Multiply this difference by sqrt(n_leads/(n_leads + 1)) (the "ct" ratio in equation (24) in the paper by Arellano and Bover). Then I generate untransformed instruments and compute the GMM 1-step estimator the same way as with first-differences, except that I use the identity matrix as the "H" matrix. Comments and suggestions are welcome. If someone wants to look at the code, I can send it. Thanks. Jean Salvati References ---------- Manuel Arellano and Olympia Bover, 1995, "Another look at the instrumental variable estimation of error-components models", Journal of Econometrics Javier Alvarez and Manuel Arellano, 2003, "The time-series and cross-section asymptotics of dynamic panel data estimators", Econometrica. * * 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/

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