Question on GMM estimation
Posted: Wed May 16, 2018 2:15 pm
Hi,
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.
Best,
Andreas
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.
Best,
Andreas