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From |
Suryadipta Roy <sroy2138@gmail.com> |

To |
statalist@hsphsun2.harvard.edu |

Subject |
Re: st: predetermined variables with xtabond2 |

Date |
Sun, 27 May 2012 10:10:30 -0400 |

Soren, Did you read the following paper (The Stata Journal Volume 9 Number 1: pp. 86-136) from the author of this code: http://www.stata-journal.com/article.html?article=st0159 I believe that you wil get the answers to your queries in the paper. Best wishes, Suryadipta. On Sat, May 26, 2012 at 4:49 AM, Søren Møller-Larsson <soren_ml@hotmail.com> wrote: > Dear all > > in the Stata help file of xtabond2 it reads the following: > " > y_it = x_it * b_1 + w_it * b_2 + u_it ... > > x_it is a vector of strictly exogenous covariates (ones dependent on > neither current nor past e_it); > > w_it is a vector of predetermined covariates (which may include the lag of > y) and endogenous covariates, all of which may be correlated with > the v_i (Predetermined variables are potentially correlated with > past errors. Endogenous ones are potentially correlated with past > and present errors.); > " > So to me it looks like predetermined variables are part of the gmmstyle() instruments. > > However further down the text it is explained how predetermined variables are treated in the ivstyle() instrument matrix: > > > ..."equation() is useful for proper handling of predetermined variables > used as IV-style instruments in system GMM. For example, if x is > predetermined, it is a valid instrument for the levels equation since > it is assumed to be uncorrelated with the contemporaneous error term. > However, x becomes endogenous in first differences, so D.x is not a > valid instrument for the transformed equation. ivstyle(x) would > therefore be inappropriate. The use of x as an IV-style instrument in > levels only could be specified by iv(x, eq(level))." > > So my question is, when do I use gmm(h, laglimits(1 .)) and when do I use iv(h, equation(level)) for predetermined h, and what is the difference? > > Kind regard > Soren > Aarhus university, Denmark > > * > * 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/ * * 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/

**Follow-Ups**:**RE: st: predetermined variables with xtabond2***From:*Søren Møller-Larsson <soren_ml@hotmail.com>

**References**:**st: predetermined variables with xtabond2***From:*Søren Møller-Larsson <soren_ml@hotmail.com>

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