Arellano-Bover/Blundell-Bond lags?

[Daniel Son]

Dear all,

I am struggling with the Arellano-Bover/Blundell-Bond model, especially with how many lags to include. I have no idea when to add 1rst, 2nd or 3rd lag to the dependent variable and the endogenous variables.

Should I follow some sort of error and trial by running the model and than testing it with the Sargan test?

Many thanks in advance

[Vinko Zaninović]

Hi,

for the question you are asking, you first need to see results of the Arellano-Bond test for serial correlation (Stata command: estat abond, but you should first check [if you didn't already] http://www.stata.com/manuals13/xtxtd...estimation.pdf and read the explanation).

Best