General xtabond2 queries

[Joshua Evanss]

Dear Statalist,

I am examining quarterly data for an unbalanced panel of 11,000+ banks from 1996:Q1 to 2016:Q4 using Stata/IC. I am using a system gmm model through xtabond2. My regression code is as follows:

xtset id dateq

xtabond2 LCCF l.LCCF T1RAT SIZE RISK ROE MS MNA COMP POP INCG GDPG UNEM FFR q2_1997- q4_2016, ///
gmm(l.LCCF T1RAT SIZE RISK ROE MS MNA, lag(3 4) collapse) iv(COMP POP INCG GDPG UNEM FFR q2_1997- q4_2016) ///
twostep robust small nodiffsargan

For completeness, variables q2_1997- q4_2016 are dummies for each quarter to introduce time fixed effects. I have included all bank-level variables as endogenous in the -gmm- option, and all other variables as instruments in the -iv- option.

I understand that the -collapse- suboption of the -gmm- command is meant for datasets where the number of groups > number of instruments. This is obviously not the case with my data, as I have 11,000+ banks, so I do not think that it is necessary nor justified to include it. However, if I exclude the -collapse- suboption, using this code:

xtset id dateq

xtabond2 LCCF l.LCCF T1RAT SIZE RISK ROE MS MNA COMP POP INCG GDPG UNEM FFR q2_1997- q4_2016, ///
gmm(l.LCCF T1RAT SIZE RISK ROE MS MNA, lag(3 4)) iv(COMP POP INCG GDPG UNEM FFR q2_1997- q4_2016) ///
twostep robust small nodiffsargan

I get the following error:

                     J():  3900  unable to allocate real <tmp>[927864,588]
              _Explode():     -  function returned error
           _ParseInsts():     -  function returned error
         xtabond2_mata():     -  function returned error
                 <istmt>:     -  function returned error

Why does this error occur? xtabond2 seems very limited the detail of its error reporting.

[Phil Bromiley]

You might try xtabond or one of the other two gmm estimators in the panel data estimator documentation.

[Phil Bromiley]

Also Roodman has written a particularly helpful paper on using xtabond2.