I am using gravity model for the trade analysis. I had read some literature and find out that there are many methods for the estimation such as fixed effect, random effect, GMM etc. I am going to used GMM as it address both the issues heterosekdesticy and auto correlation, while apply the GMM Stata ask me to put the instrumental variable but I don’t have any instrumental variable, when I search about this problem on some forum that advised me to put all dependent variable as instrumental variable.
gmm (Trade - {xb: GDPi GDPj distance _cons}), instruments(GDPi GDPj distance)
I need your valuable suggestion on that
gmm (Trade - {xb: GDPi GDPj distance _cons}), instruments(GDPi GDPj distance)
I need your valuable suggestion on that