Re: st: instrumental variables, reg3, simultaneous equation model, var

[Michael McCulloch <mm@pinestreetfoundation.org>]

Hello, it would be helpful if your question were more informative, for  
example on your question, is the procedure correct and appropriate for  
what type of data? Perhaps you could
 consult the Statalist FAQ, particularly sections 3.2 ("Write clear  
questions") and 4 ("What to do if you do not get an answer"), and then  
re-submit a more informative question:
http://www.stata.com/support/faqs/res/statalist.html#question

Michael


On Feb 24, 2010, at 9:19 AM, Agrar Fagma wrote:

> Dear all:
>
> I didn't get an answer yet but a possible solution by myself:
>
> reg3  (F R lagged_F lagger_r) (R F lagged_F lagger_r),inst(lagged_F  
> lagger_r z1 z2 z3 z4)
> works. But my question remains: Is this procedure correct and  
> appropriate?
> Regards
>
> A.Dedder
>
>
> -------- Original-Nachricht --------
> > Datum: Wed, 24 Feb 2010 16:53:15 +0100
> > Von: agfa1970@gmx.de
> > An: statalist@hsphsun2.harvard.edu
> > Betreff: st: instrumental variables, reg3, simultaneous equation  
> > model, var
> > Dear all:
> >
> > The following text my appear long, but it is very precise (and  
> > probably
> > easy stuff).
> >
> > I estimated the following VAR(2):
> >
> > F_{t} =          F_{t-1} + F_{t-2} +...+R_{t-1} + R_{t-2} +...+u_{t}
> > R_{t} =          F_{t-1} + F_{t-2} +...+R_{t-1} + R_{t-2} +...+u_{t}
> >
> > Now I would like to insert contemporaneous values on the right -  
> > hand -
> > side of the VAR which would become a structural VAR. For  
> > identification and
> > because of endogeneity, I would need 1 restriction, ie. I could  
> > either
> > estimate
> >
> > F_{t} =  R_{t} + F_{t-1} + F_{t-2} +...+R_{t-1} + R_{t-2} +...+u_{t}
> > R_{t} =          F_{t-1} + F_{t-2} +...+R_{t-1} + R_{t-2} +...+u_{t}
> >
> > or
> >
> > F_{t} =          F_{t-1} + F_{t-2} +...+R_{t-1} + R_{t-2} +...+u_{t}
> > R_{t} =  F_{t} + F_{t-1} + F_{t-2} +...+R_{t-1} + R_{t-2} +...+u_{t}
> >
> > with a normal Choleski-Decomposition.
> >
> > As I have a bigger VAR as in this example, I cannot enter that many
> > restrictions (long-run restrictions are neither possible because I  
> > have no
> > theory!).
> >
> > Now comes my point and problem:
> >
> > I wonder whether I could estimate
> >
> > F_{t} =  R_{t} + F_{t-1} + F_{t-2} +...+R_{t-1} + R_{t-2} +...+u_{t}
> > R_{t} =  F_{t} + F_{t-1} + F_{t-2} +...+R_{t-1} + R_{t-2} +...+u_{t}
> >
> > and fight the obvious endogeneity by 3SLS or the STATA command  
> > reg3 ??
> > I have 4 instruments (which I do not want to appear on the right  
> > hand side
> > of the equations if possible as I would not have the original VAR any
> > more) with which I would like to "replace" the contemporaneous  
> > right hand side
> > variables R_{t} and F_{t}. Would this work? I really searched a  
> > long time
> > but could not find any information regarding 3SLS (or GMM) and  
> > estimation of
> > a structural VAR.
> >
> > If I have to include my instruments on the right hand side of the VAR
> > (which would become a simultanous equation model), could I still  
> > use the 3SLS
> > command..? Would GMM be better? Or is there any error in my model/  
> > do I not
> > understand the methodology of instrumental variables right?
> >
> > I tried it without lagged variables and it worked fine (the z's are  
> > my
> > instruments):
> >
> > reg3 (F R) (R F), inst(z1 z2 z3 z4)
> >
> > But:
> >
> > reg3 (F R = L.F L.R) (R F = L.F L.R), inst(z1 z2 z3 z4)
> >
> > does not work!
> >
> > STATA says: "Covariance matrix of errors is singular"
> > Where is my mistake?? Is this due to poor instruments? Or is the  
> > model not
> > testable at all??
> >
> > Of course, I read the STATA11 manual beforehand but there's nothing  
> > about
> > a simultaneous equation model with lags..
> >
> >
> >
> > Kind regards
> >
> > Agther F. Dedder
> > --
> > Sicherer, schneller und einfacher. Die aktuellen Internet-Browser -
> > jetzt kostenlos herunterladen! http://portal.gmx.net/de/go/chbrowser
> > *
> > *   For searches and help try:
> > *   http://www.stata.com/help.cgi?search
> > *   http://www.stata.com/support/statalist/faq
> > *   http://www.ats.ucla.edu/stat/stata/
> --
> GMX DSL: Internet, Telefon und Entertainment für nur 19,99 EUR/mtl.!
> http://portal.gmx.net/de/go/dsl02
> *
> *   For searches and help try:
> *   http://www.stata.com/help.cgi?search
> *   http://www.stata.com/support/statalist/faq
> *   http://www.ats.ucla.edu/stat/stata/

Best wishes,

Michael McCulloch
Pine Street Foundation
124 Pine Street
San Anselmo, CA 94960-2674
tel:	415-407-1357
fax: 	206-338-2391


*
*   For searches and help try:
*   http://www.stata.com/help.cgi?search
*   http://www.stata.com/support/statalist/faq
*   http://www.ats.ucla.edu/stat/stata/