[Sebastian Kripfganz]

I am not sure if collapse would make a big difference here because it will not reduce the number of instruments substantially in your case. After all, the message about the singular two-step covariance matrix is just a warning (not an error message) that some of your results might not be very reliable, in particular the Hansen test, as a consequence of the small number of groups.

[Sabyasachi Tripathi]

I am using GMM estimation...then I found the following errors.

Favoring speed over space. To switch, type or click on mata: mata set matafavor space, perm.
Warning: Two-step estimated covariance matrix of moments is singular.
Using a generalized inverse to calculate robust weighting matrix for Hansen test.
Difference-in-Sargan/Hansen statistics may be negative.
estimates post: matrix has missing values
stata(): 3598 Stata returned error
xtabond2_mata(): - function returned error
<istmt>: - function returned error
r(3598);

Could you please help me? How to solve this problem.

[Sebastian Kripfganz]

You first may want to check that you have the latest version of xtabond2 and update the package if necessary. If that does not help, you could try my xtdpdgmm package as an alternative to xtabond2:

• XTDPDGMM: new Stata command for GMM estimation of linear (dynamic) panel data models
• Kripfganz, S. (2019). Generalized method of moments estimation of linear dynamic panel data models. Proceedings of the 2019 London Stata Conference.