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  • xtabond2: System GMM: how to improve the value of AR(2) and Hansen Test for overid

    xtabond2: System GMM: how to improve the value of AR(2) and Hansen Test for overid

    Today, 01:33
    Dear Stata users, I am using the System GMM approach. i have given the following command in Stata/SE 12.0 version.
    xtabond2 lngdp l.lngdp lndr lngcf lnsr lnopn i.years,gmm ( lngdp lndr lngcf lnsr lnopn, lag(1 1) ) iv(l.lngdp) twostep

    i got the following results.


    xtabond2 lngdp l.lngdp lndr lngcf lnsr lnopn i.years,gmm ( lngdp lndr lngcf lnsr lnopn, lag(1 1) ) iv(l.lngdp) twostep
    Favoring speed over space. To switch, type or click on mata: mata set matafavor space, perm.
    Warning: Two-step estimated covariance matrix of moments is singular.
    Using a generalized inverse to calculate optimal weighting matrix for two-step estimation.
    Difference-in-Sargan/Hansen statistics may be negative.

    Dynamic panel-data estimation, two-step system GMM
    ------------------------------------------------------------------------------
    Group variable: country1 Number of obs = 1595
    Time variable : years Number of groups = 145
    Number of instruments = 107 Obs per group: min = 11
    Wald chi2(17) = 2.42e+06 avg = 11.00
    Prob > chi2 = 0.000 max = 11
    ------------------------------------------------------------------------------
    lngdp | Coef. Std. Err. z P>|z| [95% Conf. Interval]
    -------------+----------------------------------------------------------------
    lngdp |
    L1. | .9713631 .0025932 374.57 0.000 .9662805 .9764458
    |
    lndr | -.1370166 .0127315 -10.76 0.000 -.1619699 -.1120634
    lngcf | .1080064 .0043553 24.80 0.000 .0994702 .1165425
    lnsr | .0105508 .0013087 8.06 0.000 .0079859 .0131158
    lnopn | -.0066939 .0030969 -2.16 0.031 -.0127637 -.0006241
    |
    years |
    2005 | 0 (empty)
    2006 | 0 (omitted)
    2007 | -.0127725 .0011484 -11.12 0.000 -.0150233 -.0105217
    2008 | -.0355241 .0017079 -20.80 0.000 -.0388715 -.0321767
    2009 | -.0768109 .0022446 -34.22 0.000 -.0812102 -.0724116
    2010 | -.0367234 .0014283 -25.71 0.000 -.0395228 -.0339241
    2011 | -.0287487 .0013824 -20.80 0.000 -.0314582 -.0260392
    2012 | -.0400038 .0014159 -28.25 0.000 -.0427789 -.0372288
    2013 | -.0360108 .0014802 -24.33 0.000 -.0389119 -.0331097
    2014 | -.0400141 .0016956 -23.60 0.000 -.0433374 -.0366909
    2015 | -.0479402 .0021016 -22.81 0.000 -.0520593 -.0438211
    2016 | -.0435217 .0018269 -23.82 0.000 -.0471024 -.0399409
    |
    _cons | .5419014 .0852887 6.35 0.000 .3747387 .7090642
    ------------------------------------------------------------------------------
    Warning: Uncorrected two-step standard errors are unreliable.

    Instruments for first differences equation
    Standard
    D.L.lngdp
    GMM-type (missing=0, separate instruments for each period unless collapsed)
    L.(lngdp lndr lngcf lnsr lnopn)
    Instruments for levels equation
    Standard
    L.lngdp
    _cons
    GMM-type (missing=0, separate instruments for each period unless collapsed)
    D.(lngdp lndr lngcf lnsr lnopn)
    ------------------------------------------------------------------------------
    Arellano-Bond test for AR(1) in first differences: z = -4.95 Pr > z = 0.000
    Arellano-Bond test for AR(2) in first differences: z = -1.77 Pr > z = 0.077
    ------------------------------------------------------------------------------
    Sargan test of overid. restrictions: chi2(89) =1550.21 Prob > chi2 = 0.000
    (Not robust, but not weakened by many instruments.)
    Hansen test of overid. restrictions: chi2(89) = 109.06 Prob > chi2 = 0.073
    (Robust, but weakened by many instruments.)

    Difference-in-Hansen tests of exogeneity of instrument subsets:
    GMM instruments for levels
    Hansen test excluding group: chi2(34) = 65.53 Prob > chi2 = 0.001
    Difference (null H = exogenous): chi2(55) = 43.54 Prob > chi2 = 0.868
    iv(L.lngdp)
    Hansen test excluding group: chi2(88) = 107.25 Prob > chi2 = 0.080
    Difference (null H = exogenous): chi2(1) = 1.81 Prob > chi2 = 0.178

    Will someone help me that how to improve the value of Arellano-Bond test for AR(2) in first differences and Hansen test of overid. restrictions: chi2(89) . Thanking in anticipation.
    Kind Regards: Zubair Khan

  • #2
    Zubair:
    welcome to Stata forum.
    You posted your first query on the wrong forum.
    Please repost it on the General forum (and see the FAQ about the features of the different forums Stata forum is composed of). Thanks.
    Kind regards,
    Carlo
    (StataNow 18.5)

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