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  • Dynamic panel models

    Hi everyone,

    Would you be so kind to help me determine which command in Stata is most suitable for evaluating the model I am considering. The idea is to estimate a regression with at most 21 explanatory variables where the model also contains a lagged dependent variable as regressor. My sample contains almost the same number of countries and years (N=28 and T=27). It is clear to me that with lagged dependent variable as regressor, dynamic specification should be estimated and I have looked into Stata options that involve the xtdpdgmm, xtdpdbc, xtdpdqml and xtabond2 commands. I also know that GMM estimators for dynamic panel models are designed for large N and small T, and I am aware that the N dimension in my sample is rather small and time dimension is long to apply these commands. Taking into account all this, I am not sure if it is correct to apply some of these commands. I would be very grateful if you recommend me another estimation methods for my dynamic specification.

  • #2
    Given your NxT dimensions, trying xtlsdvc first, and mabye xtdpdqml as secondary check. Both are more appropriate than GMM in your situation, I think.

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    https://www.stata.com/meeting/10uk/LSDVC_slides.pdf

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    • #3
      xtdpdbc dominates xtlsdvc. 21 explanatory variables is quite a lot for a data set with such a small N. With T=27, you may not even need to apply a correction for the lagged dependent variable (although this depends on the characteristics of the data); compare your results from xtdpdbc with xtreg, to see if there is any substantial difference.
      https://twitter.com/Kripfganz

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      • #4

        Thank you very much.

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