Hi, all
I am new to the PVAR and currently estimating a panel VAR model using pvarsoc. But I am running into convergence issues (convergence not achieved). Here is my code:
pvarsoc y1 y2 ,exog( AGE Tenure BoardSize OutsideDIR Lag_LnSales Lag_Leverage Lag_ROA Lag_RET VOL Lag_CAPEX Lag_RD Lag_BTM ) maxlag(3) pvaro(instl(1/4))
Convergence fails when both "AGE" and "Tenure" are included in the model. However, if I exclude either one, convergence is achieved. I examined the correlation between AGE and Tenure (r=0.43). Could this relatively high correlation between the two variables cause the GMM convergence issue?
Or would there be any other potential reasons for the convergence issues?
Any insights on how to deal with convergence issues would be appreciated.
I am new to the PVAR and currently estimating a panel VAR model using pvarsoc. But I am running into convergence issues (convergence not achieved). Here is my code:
pvarsoc y1 y2 ,exog( AGE Tenure BoardSize OutsideDIR Lag_LnSales Lag_Leverage Lag_ROA Lag_RET VOL Lag_CAPEX Lag_RD Lag_BTM ) maxlag(3) pvaro(instl(1/4))
Convergence fails when both "AGE" and "Tenure" are included in the model. However, if I exclude either one, convergence is achieved. I examined the correlation between AGE and Tenure (r=0.43). Could this relatively high correlation between the two variables cause the GMM convergence issue?
Or would there be any other potential reasons for the convergence issues?
Any insights on how to deal with convergence issues would be appreciated.
