[Akbar Isayev]

Thank you very much for clarification.

[Sebastian Kripfganz]

This discrepancy could indicate that the weighting matrix is not precisely estimated. This can happen if you have many instruments relative to the number of groups and/or if you have weak instruments. If you have not done this yet, try to reduce the number of instruments by curtailing the lags used as instruments and/or by collapsing the instruments.

Alternatively, you could also try the iterated GMM estimator, option igmm instead of twostep, but it may not always converge in a reasonable number of steps if there are some underlying problems with the weighting matrix.

If you only have a small number of groups, then there is sometimes not much that can be done. Estimating the weighting matrix precisely is then hardly possible and overidentification tests have only limited reliability in such a case.

[Akbar Isayev]

Dear Sebastian,

I have a question to you related with "Sargan-Hansen test of the overidentifying restrictions" test. In case we get different results for 2-step weighting matrix and 3-step weighting matrix, can we rely on one of them? Particularly in my case Sargan-Hansen results for 2-step weighting matrix is 15.97 (p=0.314) whilst for 3-step weighting matrix it is 26.95 (p=0.019). Is it acceptable?

Thank you in advance.

[Akbar Isayev]

It worked. Thank you very much. I was making a technical mistake. It is fine now.

[Sebastian Kripfganz]

It should work in the same way with xtdpdgmm. Could you be more specific about what did not work, ideally by providing code and Stata output?

[Akbar Isayev]

Dear Sebastian,

I have a question related with how to apply interaction term in xtdpdgmm syntax. In xtabond2, when I want to interact var1 with var2, I have to write it like c.var1##c.var2 inside the syntax. What about xtdpdgmm? I tried same kind but it didn't work. I will appreciate if you provide an answer for me.

Thanks in advance.

Have a nice day.

[Akbar Isayev]

Thank you very much dear Sebastian.

Have a nice day.

[Sebastian Kripfganz]

1. The nonlinear moment conditions that are added with option nl(noserial) are redundant if gmm(depvar, lag(2 .) model(diff)) and gmm(depvar, diff lag(1 1) model(level)) are also specified; see Blundell and Bond (1998, Journal of Econometrics, page 124). Strictly speaking, this redundancy only holds if there is no curtailing and no collapsing of the instruments, although I probably would not use this as an argument to add nonlinear moment conditions to a system GMM estimator. So, yes, in general there is no need for adding nonlinear moment conditions to a system GMM estimator that has lagged levels of the dependent variable as instruments for the first-differenced model and the first-differenced lagged dependent variable as an instrument for the level model.

2. You do not necessarily have to add all of these instruments for the level model if you believe that some of them are not needed or not valid. You can still call it a "system GMM" estimator as long as you include some of them.

[Akbar Isayev]

Dear Sebastian Kripfganz,

I have 2 questions related with xtdpdgmm:

1) In your London Stata Conference slides there is a sentence: "These nonlinear moment conditions are redundant when added to the sys-GMM moment conditions (Blundell and Bond, 1998) but improve efficiency when added to the diff-GMM moment conditions" related with nonlinear moment conditions. Does this mean that using noserial option with system GMM is meaningless? In other words, while applying system GMM there is no need for adding nonlinear moment conditions. Am I correct?

2) As I understand from the xtdpdgmm syntax, when you add differenced instruments for level form to the difference GMM syntax it becomes system GMM. And inside xtdpdgmm syntax, you have to categorize all variables that exist in main model as instruments (endogenous, predetermined and exogenous). For example:

e endogen
p predetermined
s strictly exogenous

xtdpdgmm L(0/1).depvar e p s, model(diff) collapse gmm(depvar, lag(2 .)) gmm(e, lag(2 .)) gmm(p, lag(1 .)) gmm(s, lag(0 .)) two vce(r) teffects nofooter

Now my questions is: when you add differenced instruments for level form to go for system GMM, should we categorize all variables as instruments for level form? Or we can use some of them? In other words, can we add only lets say gmm(depvar e p, lag(1 1) m(l) diff) to the abovementioned syntax to make it system GMM or we have to add all variables like gmm(depvar e p, lag(1 1) m(l) diff) gmm(s, lag(0 0) m(l) diff) ?
Just to make sure I am asking my question in a right way I put it in another way: Should we categorize all variables as differenced instruments for level form? or some of them will be enough in terms of syntaxing for system GMM?

Thank you in advance

[Sebastian Kripfganz]

xtdpdgmm does not support constrained estimation, but testing linear restrictions after the estimation is possible:

test _b[x1] = 1

or

test x1 = 1

[Jerry Kim]

Hi Dr. Kripfganz,

Thank you for the effort on this package which does help researchers a lot. I have a small question regarding the constraint on coeffcients. Let's say if I wish to set a predetermined variable's coefficient to 1 as an additional constraint, does xtdpdgmm support the following kind of coding currently

constraint 1 x1 = 1

Or maybe this type:

test _b1 = 1

Thank you!

[Sebastian Kripfganz]

I have fixed a minor bug in xtdpdgmm that could result in an incorrect error message in rare instances when using option vce(cluster) on a subsample of the data. The new version 2.3.9 is available on my website:

net install xtdpdgmm, from(http://www.kripfganz.de/stata/) replace

[Sebastian Kripfganz]

I am not sure to what "errors" you are referring. Clearly, it is troubling that so many coefficients are omitted. The main problem appears to be with your data: You only have 7 groups which is way too few for this type of estimation. I am afraid the kind of subset analysis you would like to do is infeasible. You might want to introduce some interaction effects (country group dummies with regressors of particular interest) into the estimation on the whole sample instead.

[Vaibhav Puri]

Dear Prof. Kripfganz

I am new to Panel Data regression and to the xtdpdgmm syntax.

In my research, I am using a subset of 58 country-specific data over 14 years .

The following is the model which I used for larger number of countries (around 190) but wanted to check the same for the subset of country groupings. I am getting some errors:

xtdpdgmm LFPR_FEM_TOT l.LFPR_FEM_TOT LnGDP_2017 Sq_LnGDP_2017 Ln_Rail_Norm Fertility_Rate Indv_Internet_PerPop urbn_pop_tot Trade_Per_GDP if Year>2009, twostep vce(cluster CCode) teffects gmmiv(l.LFPR_FEM_TOT, lag(0 5) collapse model(fodev)) gmmiv(LnGDP_2017, lag(1 5) collapse model(fodev)) gmmiv(Ln_Rail_Norm Fertility_Rate Indv_Internet_PerPop urbn_pop_tot Trade_Per_GDP, lag(1 2) collapse model(level)) nofootnote

Kindly guide me about the mistakes I am making and the errors in model specification. How can I improve upon them and in building the model?

[Sebastian Kripfganz]

The problem reported by Chen ly had been fixed with the recent update to version 2.3.8. This version is now also available on SSC.