Question on GMM estimation

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Question on GMM estimation

Postby andwes » Wed May 16, 2018 2:15 pm


Im trying to estimate an equation in the attached file using GMM (the file provides a simplified example of when I run into problems. However, when I‎ use both current and lagged variables (lproductivity_manufact) as independent variables (also added as instruments) i get an error message that the order condition is violated (Order condition violated - Insufficient instruments). When I use only the curent value, everything works fine. I guess i must be doing something wrong, but cannot figure out what is the problem. If anyone knows what is the problem, please let me know.


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Non-normality and collinearity are NOT problems!
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Re: Question on GMM estimation

Postby startz » Wed May 16, 2018 4:17 pm

You can't have fewer instruments than coefficients.

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