Hi Sir. I am using a dynamic panel data model and system GMM approach for model estimation. My model is as follows:
R(i,t) = R(i,t-1) + R(i,t-1)^2 + FC(binary/dummy var) + Change in CSH(i,t) + Change in CSH(i,t-1) + FC*Change in CSH(i,t) + CSF(i,t) + CSF(i,t-1) + STI(i,t) + STI(i,t-1) + DBI(i,t) + DBI(i,t-1) + MTK(i,t) + SLG(i,t) + FMS + FA + TIMEEFFECTS + FIRMEFFECTS + ERROR TERM
All variables are financial except FC, FMS & FA. Literature used lagged levels dated t-3 and t-4 as instruments for the regression in differences, and lagged differences dated t-2 for the regression in levels.
My data is unbalanced panel data set. Observations are 3116 for approximately 325 firms over the period of 24 years i.e. N>t. A number of observations are missing for majority of firms (from beginning, middle and ending periods).
To estimate DPD model, I am running following 2 step system GMM command:
xtdpdgmm L(0/1).R(i,t) R(i,t-1)^2 CSH CSH_L1 CSF CSF_L1 STI STI_L1 DBI DBI_L1 m MTK SLG i.FC c.CSH#i.FC FMS FA, model(DIFF) collapse gmm(R_L1 CSH CSF STI DBI SLG MTK FMS, lag(2 5)) gmm(FA FC, lag(1 5)) gmm(R_L1 CSH CSF STI DBI SLG MTK FMS, lag(1 3) diff model(level)) gmm(FA FC, lag(0 1) diff model(level)) two vce(r)
Can you please advise if model is correct? Using 4 lags leads to invalid results. Also, please advise on choice of instruments; shall I use iterated gmm command for that or predict ivreg? I am not getting on how to choose instruments as using same instruments as literature is giving insignificant result for most of variables and also resulting in unsatisfactory underidentification results.
Also, as I mentioned I have missing period values from start, ending and middle so can I use Forward orthogonal GMM command with 2-step system GMM?
Your kind response and feedback will be highly appreciated.
R(i,t) = R(i,t-1) + R(i,t-1)^2 + FC(binary/dummy var) + Change in CSH(i,t) + Change in CSH(i,t-1) + FC*Change in CSH(i,t) + CSF(i,t) + CSF(i,t-1) + STI(i,t) + STI(i,t-1) + DBI(i,t) + DBI(i,t-1) + MTK(i,t) + SLG(i,t) + FMS + FA + TIMEEFFECTS + FIRMEFFECTS + ERROR TERM
All variables are financial except FC, FMS & FA. Literature used lagged levels dated t-3 and t-4 as instruments for the regression in differences, and lagged differences dated t-2 for the regression in levels.
My data is unbalanced panel data set. Observations are 3116 for approximately 325 firms over the period of 24 years i.e. N>t. A number of observations are missing for majority of firms (from beginning, middle and ending periods).
To estimate DPD model, I am running following 2 step system GMM command:
xtdpdgmm L(0/1).R(i,t) R(i,t-1)^2 CSH CSH_L1 CSF CSF_L1 STI STI_L1 DBI DBI_L1 m MTK SLG i.FC c.CSH#i.FC FMS FA, model(DIFF) collapse gmm(R_L1 CSH CSF STI DBI SLG MTK FMS, lag(2 5)) gmm(FA FC, lag(1 5)) gmm(R_L1 CSH CSF STI DBI SLG MTK FMS, lag(1 3) diff model(level)) gmm(FA FC, lag(0 1) diff model(level)) two vce(r)
Can you please advise if model is correct? Using 4 lags leads to invalid results. Also, please advise on choice of instruments; shall I use iterated gmm command for that or predict ivreg? I am not getting on how to choose instruments as using same instruments as literature is giving insignificant result for most of variables and also resulting in unsatisfactory underidentification results.
Also, as I mentioned I have missing period values from start, ending and middle so can I use Forward orthogonal GMM command with 2-step system GMM?
Your kind response and feedback will be highly appreciated.
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