Hello
I am trying to build a Dynamic Panel Equation with the following information
- Variables: Y, X, and C (controlling variable)
- Time t1, t2, t3, ..., tn

At any time t, I propose the following possible relationships. Let t=t2
X(t2) → Y(t2)
Y(t1) → Y(t2)
Y(t1) → X(t2)

Array

Taking the information above, the mode is:

Y(t) = a + b*Y(t-1) + c*X(t) + d*X(t-1) + Σθ*C(t)

Where:
- C(t): are controlling variables at time t

I have two questions:
1. Does the model above correct?
2. If the model above is correct then the Instrument Variables (according to Anderson and Hisao 1981) is:
- IV1: Y(t-1) - Y(t-2)
- IV2: X(t-1) - X(t-2)

Is this correct?

Thank you
Phan