GMM error code

[timh]

Hi, I am estimating a model with a dynamic component. The model contains a one-period lag of the dependent variable and four other contemporaneous variables. I can use a 2SLS method, but it is suggested that I explore the Arellano Bond method. I follow the dynamic panel wizard for the GMM/DPD method. When I run the regression I receive the message "number of instruments greater than number of observations". This is an unbalanced panel covering over 40 cross sections and 60 time periods and I am using the variables as above. Why would this error message appear? Is the AB method not suitable for such large time periods?

[EViews Gareth]

You probably don't have enough observations. With the AB model you can use a lot of instruments very quickly.

[timh]

I've 1600 observations. When I reduce this to just 3-4 time periods the error code changes to near singular matrix, which is what one would expect. How does the full period model generate over 1600 instruments?

[EViews Gareth]

AB model generates more instruments the more time periods you have.