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natasha agarwal <firstname.lastname@example.org>
Fri, 4 Feb 2011 15:15:44 +0000
I have a question relating to the use of xtivreg2.
I am estimating a cobb-douglas production function where I am regressing
Y = L+K+CF+FDI+CF*FDI+year dummies+error
I believe that cash flow (CF)and output (Y) in the above regression
have reverse causality, i.e. CF determines Y but Y could also
So I thought instrumenting CF would be the best idea to break the
To do so I first differenced the above equation and then used lags
levels of CF of year 2 and year 3 as the instrument.
However, I don't know how would one do the instrumenting when the
endogenous variable is interacted with the exogenous variable??
I would be grateful if anyone could help me on this.
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