I need to run a two-step System-GMM, but due to my lack of experience in using this kind of approach, I'm not sure if my model is correctly specified.

My dependent variable is I

My explanatory regressors are: P Arpc Etanol (endogenous)

I also want to include time dummies - 11 years (exogenous)

I'm considering the first two lags as instruments to the difference equation and the first lag as instrument to the level equation.

My code is specified as:

My output is reported above:

Can anyone indicate me whether my equation specification is right?

My dependent variable is I

My explanatory regressors are: P Arpc Etanol (endogenous)

I also want to include time dummies - 11 years (exogenous)

I'm considering the first two lags as instruments to the difference equation and the first lag as instrument to the level equation.

My code is specified as:

Code:

xtabond2 L(0/1).I P Arpc Etanol year3-year11, gmm(L.I, laglimits(1 2) collapse equation(diff)) gmm(P Arpc Etanol , laglimits(1 2) collapse equation(diff)) gmm(L.I, laglimits(0 1) collapse eq(level)) gmm(P Arpc Etanol , laglimits(1 1) collapse eq(level)) ivstyle(year3-year11 , eq(level)) twostep small robust

Code:

Dynamic panel-data estimation, two-step system GMM ------------------------------------------------------------------------------ Group variable: Ufs Number of obs = 270 Time variable : years Number of groups = 27 Number of instruments = 23 Obs per group: min = 10 F(13, 26) = 1421.07 avg = 10.00 Prob > F = 0.000 max = 10 ------------------------------------------------------------------------------ | Corrected I | Coef. Std. Err. t P>|t| [95% Conf. Interval] -------------+---------------------------------------------------------------- I | L1. | .8946351 .150555 5.94 0.000 .5851649 1.204105 | P | .1013345 .1491141 0.68 0.503 -.2051738 .4078429 Arpc | .0102151 .1137837 0.09 0.929 -.2236706 .2441008 Etanol | .0367713 .0355978 1.03 0.311 -.036401 .1099435 year3 | .1133744 .0309018 3.67 0.001 .0498548 .1768941 year4 | .0733699 .0272426 2.69 0.012 .017372 .1293678 year5 | .0001349 .0255086 0.01 0.996 -.0522989 .0525686 year6 | .0980599 .0411414 2.38 0.025 .0134926 .1826272 year7 | .0512383 .0323415 1.58 0.125 -.0152405 .1177172 year8 | .1682475 .0409207 4.11 0.000 .0841339 .2523611 year9 | .1223861 .0460504 2.66 0.013 .0277281 .2170441 year10 | .1339396 .0440615 3.04 0.005 .0433699 .2245092 year11 | -.000983 .0441197 -0.02 0.982 -.0916723 .0897064 _cons | -.160847 .3426776 -0.47 0.643 -.8652309 .5435369 ------------------------------------------------------------------------------ Instruments for first differences equation GMM-type (missing=0, separate instruments for each period unless collapsed) L(1/2).(P Arpc Etanol) collapsed L(1/2).L.I collapsed Instruments for levels equation Standard year3 year4 year5 year6 year7 year8 year9 year10 year11 _cons GMM-type (missing=0, separate instruments for each period unless collapsed) DL.(P Arpc Etanol) collapsed DL(0/1).L.I collapsed ------------------------------------------------------------------------------ Arellano-Bond test for AR(1) in first differences: z = -2.83 Pr > z = 0.005 Arellano-Bond test for AR(2) in first differences: z = -0.39 Pr > z = 0.694 ------------------------------------------------------------------------------ Sargan test of overid. restrictions: chi2(9) = 9.62 Prob > chi2 = 0.382 (Not robust, but not weakened by many instruments.) Hansen test of overid. restrictions: chi2(9) = 12.31 Prob > chi2 = 0.196 (Robust, but weakened by many instruments.) Difference-in-Hansen tests of exogeneity of instrument subsets: GMM instruments for levels Hansen test excluding group: chi2(4) = 4.20 Prob > chi2 = 0.379 Difference (null H = exogenous): chi2(5) = 8.11 Prob > chi2 = 0.150 gmm(L.I, collapse eq(diff) lag(1 2)) Hansen test excluding group: chi2(7) = 8.70 Prob > chi2 = 0.275 Difference (null H = exogenous): chi2(2) = 3.61 Prob > chi2 = 0.165 gmm(P Arpc Etanol, collapse eq(diff) lag(1 2)) Hansen test excluding group: chi2(3) = 3.06 Prob > chi2 = 0.382 Difference (null H = exogenous): chi2(6) = 9.25 Prob > chi2 = 0.160 gmm(L.I, collapse eq(level) lag(0 1)) Hansen test excluding group: chi2(7) = 11.18 Prob > chi2 = 0.131 Difference (null H = exogenous): chi2(2) = 1.13 Prob > chi2 = 0.569 gmm(P Arpc Etanol, collapse eq(level) lag(1 1)) Hansen test excluding group: chi2(6) = 8.68 Prob > chi2 = 0.193 Difference (null H = exogenous): chi2(3) = 3.63 Prob > chi2 = 0.304 iv(year3 year4 year5 year6 year7 year8 year9 year10 year11, eq(level)) Hansen test excluding group: chi2(0) = 0.00 Prob > chi2 = . Difference (null H = exogenous): chi2(9) = 12.31 Prob > chi2 = 0.196

Can anyone indicate me whether my equation specification is right?

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