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st: passthru option in xtabond2


From   "joserra coco" <pereastroika@hotmail.com>
To   statalist@hsphsun2.harvard.edu
Subject   st: passthru option in xtabond2
Date   Tue, 17 Jan 2006 14:16:35 -0800

Dear Statalist users,

After reading the help file of the xtabond2 command, I see that the passthru option in the gmmstyle () section allows to create instruments that use not the first-differences of the specified variable but the original levels, to be used in the equation in levels. The reason is that "under the standard assumptions" these instruments are not valid. Could anybody ellaborate on this point? Why (or when) is the sole use of levels (disregarding first differences) as instruments justified in the context of xtabond2?

Thanks for any information,
J.

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