Thursday, January 05, 2006

st: AW: RE: xtabond2: gmm in levels only meaningful?

Unfortunately not, Gianmarco. I already referred to Baltagi, Arellano, Verbeek, Greene etc. and most of the cited GMM-related studies (Anderson, Hsiao, Arellano /Bond, Blundell/Bond, Keane/Runkle), however with no answer to my problem. Any other ideas?

-----Urspr√ľngliche Nachricht----- Von: owner-statalist@hsphsun2.harvard.edu [mailto:owner-statalist@hsphsun2.harvard.edu] Im Auftrag von Leon, Gianmarco Gesendet: Donnerstag, 5. Januar 2006 16:33 An: statalist@hsphsun2.harvard.edu Betreff: st: RE: xtabond2: gmm in levels only meaningful?

Baltagi's "Econometrics of panel data" has good examples for GMM, they are also provided in stata. Hope that helps..

Gianmarco

-----Original Message----- From: owner-statalist@hsphsun2.harvard.edu [mailto:owner-statalist@hsphsun2.harvard.edu]On Behalf Of Niko Wrede Sent: Thursday, January 05, 2006 10:32 AM To: statalist@hsphsun2.harvard.edu Subject: st: xtabond2: gmm in levels only meaningful?

Dear all, the System-GMM estimator exploits moment conditions for equation in differences AND for equation in levels.

However, using xtabond2 ..., gmm(depvar, lag(2 .) equ(BOTH)) ... I do not get plausibel results (in almost all cases the Hansen J Test indicates overidentifying restrictions).

But when using xtabond2 ..., gmm(d.depvar, lag(2 .) equ(LEVEL)) ... [WITHOUT an additional gmm(depvar, lag(2 .) equ(diff) command] the results are economically plausibel and the Hansen J Test is ok.

My understanding of GMM is, that one has to use the equation in differences to get rid of the individual effects. In addition, one can exploit the equation in levels and use differences of the depvar as instruments for those.

But I have not seen GMM estimators, that use ONLY the equation in levels. However, maybe anybody knows of such cases and is able to give some references. I would greatly appreciate any help since I already spent a lot of time searching for valuable information on this topic.

Niko

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