I would like to use GMM and external IVs at the same time and struggling to see the difference between putting the external IVs as gmm vs as ivstyle. As a starting point, here is the 2SLS model with two external IVs meant to instrument for the endogenous L.x1, where the external IVs associated with L.x1 are L.z1a L.z1b.
Code:
ivregress 2sls y L.y L.x2 L.x3 i.year i.id (L.x1 = L.z1a L.z1b)
(1)
Code:
xtabond2 y L.y L.x1 L.x2 L.x3 i.year, gmm(L.y L.x2) ivstyle(L.x3 L.z1a L.z1b i.year, equation(level)) twostep
Code:
xtabond2 y L.y L.x1 L.x2 L.x3 i.year, gmm(L.y L.x2) gmm(L.z1a L.z1b) ivstyle(L.x3 i.year, equation(level)) twostep
Assuming these are both possibly logical, does (2) make a more robust model with L.z1a L.z1b as GMM, thereby including their lags as the instruments for the main endogenous variable L.x1?
Does changing
Code:
gmm(L.z1a L.z1b)
Code:
gmm(L.z1a L.z1b, laglimit(1 1))
And lastly, why is equation(level) not included in the gmm area (in any of the examples and usually in discussions online) - I cannot make sense of this in the help file.
Thanks very much for your time!
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