First time posting here.
I am writing research on digitalization in EU28 and its economic effect. After doing a FE model such as this:
Code:
xtreg y x1 x2 i.year, fe vce (robust)
- I read that first-differencing removes panel fixed effects. Does that mean country specific effects are eliminated and I have to only include time dummies as I have done in an example below or should I include country dummies as well?
- Does suppressing constant affects results? I read that in original AB (1991) paper it did not but is there occasion that this is not true?
- Since my data is expressed in growth rates (by first-differencing natural log of my variables), except for inflation, I was thinking whether additional first-differencing that is done by STATA to find instruments is somewhat a problem?
- Lastly, I was wondering whether two step estimator is needed here? I read about Windmeijer bias correction but I am not sure what that is and what are the occasions one shuld use two step estimator? (after I introduce "twostep" I get the following error: variance-covariance matrix of the two-step estimator is not full rank. Two-step estimator is not available. One-step estimator is available and variance-covariance matrix provides correct coverage. ")
I understand that some parts of this is fairly simple for some, yet dynamic panels are absolutely new for me, so any help is highly appreciated. Please let me know if additional information is required.
( I ran estat abond and I reject no autocorrelation of order 1 and cannot reject no autocorrelation of order 2).
Code:
. xtabond lnRGDPPC lnfix_net lncell_sub lnnet_user lnger_ter lngcon lntopen lngcf lninflation ///_Iyear_2002 - _Iyear_2017, vce(robust) noconstant Arellano-Bond dynamic panel-data estimation Number of obs = 351 Group variable: country1 Number of groups = 27 Time variable: year Obs per group: min = 2 avg = 13 max = 15 Number of instruments = 143 Wald chi2(24) = 39057.21 Prob > chi2 = 0.0000 One-step results (Std. Err. adjusted for clustering on country1) ------------------------------------------------------------------------------ | Robust lnRGDPPC | Coef. Std. Err. z P>|z| [95% Conf. Interval] -------------+---------------------------------------------------------------- lnRGDPPC | L1. | .170156 .094328 1.80 0.071 -.0147236 .3550355 | lnfix_net | -.0002524 .0046447 -0.05 0.957 -.0093558 .008851 lncell_sub | .0376404 .0271245 1.39 0.165 -.0155227 .0908035 lnnet_user | .0053039 .0086888 0.61 0.542 -.0117259 .0223336 lnger_ter | .0858762 .0409437 2.10 0.036 .005628 .1661243 lngcon | .2420834 .039317 6.16 0.000 .1650236 .3191432 lntopen | .0328535 .0211607 1.55 0.121 -.0086207 .0743276 lngcf | .1425929 .0143577 9.93 0.000 .1144524 .1707335 lninflation | -.0010479 .0006515 -1.61 0.108 -.0023249 .0002291 _Iyear_2002 | 0 (omitted) _Iyear_2003 | -.0063436 .0048963 -1.30 0.195 -.0159401 .0032529 _Iyear_2004 | .0035061 .0048961 0.72 0.474 -.0060901 .0131023 _Iyear_2005 | .0008608 .0067311 0.13 0.898 -.0123318 .0140535 _Iyear_2006 | .0036587 .0056125 0.65 0.514 -.0073415 .014659 _Iyear_2007 | .0080905 .007153 1.13 0.258 -.0059291 .0221102 _Iyear_2008 | -.01364 .0052185 -2.61 0.009 -.023868 -.003412 _Iyear_2009 | -.034101 .0079815 -4.27 0.000 -.0497445 -.0184575 _Iyear_2010 | .0065017 .0090098 0.72 0.471 -.0111572 .0241607 _Iyear_2011 | -.0003967 .0068669 -0.06 0.954 -.0138556 .0130623 _Iyear_2012 | -.0050726 .0058925 -0.86 0.389 -.0166217 .0064764 _Iyear_2013 | .0012146 .0062783 0.19 0.847 -.0110906 .0135197 _Iyear_2014 | .0025448 .0083946 0.30 0.762 -.0139084 .018998 _Iyear_2015 | .0064822 .0119633 0.54 0.588 -.0169654 .0299298 _Iyear_2016 | .0004811 .0069569 0.07 0.945 -.0131541 .0141163 _Iyear_2017 | .0075268 .0092821 0.81 0.417 -.0106658 .0257194 ------------------------------------------------------------------------------ Instruments for differenced equation GMM-type: L(2/.).lnRGDPPC Standard: D.lnfix_net D.lncell_sub D.lnnet_user D.lnger_ter D.lngcon D.lntopen D.lngcf D.lninflation D._Iyear_2002 D._Iyear_2003 D._Iyear_2004 D._Iyear_2005 D._Iyear_2006 D._Iyear_2007 D._Iyear_2008 D._Iyear_2009 D._Iyear_2010 D._Iyear_2011 D._Iyear_2012 D._Iyear_2013 D._Iyear_2014 D._Iyear_2015 D._Iyear_2016 D._Iyear_2017
https://blog.stata.com/2015/11/12/xtabond-cheat-sheet/
https://core.ac.uk/download/pdf/6490419.pdf
https://www.stata.com/manuals13/xtxtabond.pdf
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