I am reading the paper by Roodman titled "How to do xtabond2: An introduction to difference and system GMM in Stata". I want to clarify a few things with respect to the sub-options associated with the option ivstyle in xtabond2. If I want to do a System GMM and use ivstyle() with xtabond2 WITHOUT specifying equation(diff|level|both) inside the parenthesis of ivstyle, is this going to produce a one-column vector of instruments like equation (24) in Roodman's paper?
On page 41, the following is mentioned:
Unfortunately, I don't understand the difference between ivstyle (w1 w2, equation(level)) and the compound ivstyle (w1 w2, equation(diff)) ivstyle (w1 w2, equation(level)). Which of these two actually produces the instruments matrices as those in equation (25)? Any insight will be highly appreciated.
On page 41, the following is mentioned:
The patterns in (25) can be requested with the equation() suboption, as in ivstyle(w1 w2, equation(level)) and the compound ivstyle(w1 w2, equation(diff)) ivstyle(w1 w2, equation(level)).
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