Hi there, I am estimating a fiscal reaction function in dynamic form (lagged dependent variable) and trying to choose the right model. My dataset is N=13 and T=18. A previous study has used system GMM but I am doubtful about the method because from Roodman (2009) system GMM is dubious for N<20. Also the system GMM method was developed under the assumptions of N large and T small. My data sets shows signs of endogeneity, cross-sectional correlation, heteroscedasticity and autocorrelation. Another study on the same region use Panel FE IV regressions but this does only takes care of endogeneity and not the other issues. I am thinking that a panel model with 2 lags of the endogenous variable and panel corrected standard errors should suffice? May also with FGLS?

Newt to Statalist.