EViews.com

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I am using Eviews 7.

Model A:

Y = c + log(X) + A

Using a GMM IV, instrument = A_lag. F-stat > 10

Model B:

Y = c + log(X) + A + B

Using a GMM IV, instrument = A_lag. F-stat < 10



So why is it that after B is included my F-stat < 10? This means my instrument becomes weak after B is included. What does this imply? Is A_lag and B correlated?

Thank you

You seem to have more variables than instruments. Something doesn't make sense.

Hi

A_lag is the instrument in the true sense of the word, that is the instrument for the endogenous variable.

Of course, all the right-hand side variables in the 2nd stage are included in the 1st stage as instruments too.

Thank you

You might want to post your EViews workfile, including the two equations you are estimating.

Hi

M data is confidential so I am only posting my estimation equation and results (with the coefficients value removed).
Hope you can help

Thank you

Model 2 is here

That is a surprising outcome. I do not see why you should see that large a change.

At the same time, doing GMM with 21 observations is pretty questionable. GMM is a large sample estimator.

Thanks for the reply. Then should I use TSLS instead of GMM?

Thank you

i tried with TSLS.

My F-stat stll become <10 in Model 2.

Can anyone explain why this is happening?

Thank you