Stationarity test in GMM

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Naila Jabeen
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Stationarity test in GMM

Postby Naila Jabeen » Wed Jan 02, 2013 10:06 pm

greetings...

I am estimating an equation with time series data that consists of 41 annual observations and applying GMM. The Model is: imports share = f(GDP, average tariff rates, Liberalization dummy, RER, TOT etc)
Some of the variavles are nonstationary. Should i make them stationary before applying GMM? Results are very sensitive to the choice of instruments as well. how can i test which are valid among them?

Best Regards

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